On January 6, President Barack Obama sat down with us for one of his final interviews before leaving the White House. The subject was the Affordable Care Act — the legislation that has come to carry his name and define his legacy.
It was strange circumstances Obama found himself in. He was leaving office an unusually popular president, with approval numbers nearing 60 percent. But his most important domestic achievement was imperiled. Republicans had spent years slamming Obamacare for high premiums, high deductibles, high copays, and daunting complexity. Donald Trump had won the White House in part by promising to repeal the ACA and replace it with “something terrific.” Both houses of Congress would be controlled by Republicans who appeared set to carry out his plan.
But over the course of the next 70 minutes, it became clear that Obama didn’t think they would get the job done. If he sounded unexpectedly confident, it’s because he believed the wicked problems of health reform — problems that bedeviled him and his administration for eight years — would turn on the GOP with equal force.
“Now is the time when Republicans have to go ahead and show their cards,” he said. “If in fact they have a program that would genuinely work better, and they want to call it whatever they want — they can call it Trumpcare or McConnellcare or Ryancare — if it actually works, I will be the first one to say, ‘Great; you should have told me that in 2009. I asked.’”
Two months later, the release of House Republicans’ replacement plan — the American Health Care Act — has made Obama look prescient. The bill quickly placed Republicans under siege from both the left, which has found more to like in Obamacare as its survival has become threatened, and the right, which attacked the replacement as unrealistic and ill-considered, and, most damning of all, as “Obamacare 2.0.”
The biggest problem Republicans face, though, isn’t from activists in either party. It’s from the tens of millions of Americans who now depend on Obamacare, and their friends, families, co-workers, and neighbors. They have been promised a replacement that costs less and covers more, and the GOP’s plan does neither.
According to the Congressional Budget Office, the AHCA would throw 24 million people off health insurance over the next 10 years and leave the remnant in plans with higher deductibles, higher copays, and less coverage. The law would let insurers charge older Americans 500 percent more than younger Americans, and the sparer subsidies wouldn’t adjust to the local cost of insurance coverage, and thus would be insufficient in many areas. This is not the “something terrific” Trump promised, nor the kind of health care that polling shows Americans want.
We are reporters who have covered health care, and the legislative ideas that became the Affordable Care Act, since before Obama’s election. In the course of that reporting, including recent conversations with Obama and dozens of elected officials and staffers responsible for the Affordable Care Act’s design, passage, and implementation, we have unearthed several lessons from the law, which current and future health reformers should heed.
At the moment, Republicans are ignoring most of them.
Lesson 1: Everything in health care is a painful trade-off. Own it.
Obama had a habit, back in meetings during the Affordable Care Act’s drafting, his former advisers recall. He would start twisting an invisible Rubik’s cube in the air, working his hands around to try to make the pieces fit together just right.
This was what health policy felt like: trying to slot together competing priorities in a way that was just as maddening as trying to get the color sides of a Rubik’s cube to line up.
Any government health coverage expansion involves a series of trade-offs, decisions that will inevitably anger one constituency or another. Provide robust health insurance plans, for example, and you need to spend more money — if you don’t, you must decide to cover fewer people. Provide skimpier coverage, and the price tag of a health insurance expansion goes down, but people get frustrated with their high deductibles and copays.
Change the system so one group pays less, and another group, inevitably, has to pay more.
“Those trade-offs have bedeviled efforts to expand health insurance coverage for decades,” says Doug Elmendorf, who directed the Congressional Budget Office during the health law debate. “It is very hard to maximize health coverage while minimizing the cost to the government and disruptions to current insurance arrangements.”
The most important part of writing health policy isn’t figuring out a way around those trade-offs, although many legislators have tried. It’s making the trade-offs that will lead to the best outcomes, and explaining those clearly to constituents. The Obama administration knew from the start that it wanted to make health insurance more accessible to those who had traditionally struggled to get covered: people who are sicker, older, and poorer — and did not have access to employer-sponsored coverage. Democrats didn’t just want to get millions covered. They had specific demographics in mind they wanted to benefit.
“If you replace a 60-year-old with a 20-year-old, that doesn’t change the number of people covered, but it changes the value of the coverage and of the program,” says Jonathan Gruber, an MIT economist who helped the White House model the economic effects of Obamacare.
Democrats had to make very clear trade-offs to advantage this older, sicker population.
For example, the law limits the premiums that insurers could charge their oldest consumers to just three times whatever they billed the youngest enrollees. The Affordable Care Act mandated that insurers must cover 10 “essential health benefit” categories. These included medical care that plans in the individual market have historically left out, such as mental health services and maternity care.
These changes were great for those who were older and required significant medical care. But bringing unhealthy people into the market is difficult, “because it requires the healthy people who had a sweet deal in the past to pay higher rates,” says former Health and Human Services Secretary Kathleen Sebelius. “There is no question that some people’s rates went up, but the old market didn’t work very well for the majority of people who needed coverage.”
Democrats’ trade-off brought consequences, one of them being that the health care law has long struggled to attract as many young people as the White House would like. Back in 2012, administration officials told us they wanted one-third of the marketplace enrollees to be between 18 and 34. The number has never gotten there, hovering around one-quarter for the past four years.
Zeke Emanuel, who worked as one of President Obama’s health care advisers, says the administration tilted the playing field too far in favor of the sick and elderly, making it difficult for young people to sign up. He says the administration should have let insurers charge older people more, perhaps four times as much as the youngest consumers.
“We made the wrong trade-off,” he says. “The consequence is costs for old people are higher because we don’t have enough young people in the pool.”
Veterans of the 2009 health care fight have dozens of stories about different trade-offs they had to make, ones that would anger different constituencies. The administration was constantly trying to balance the desire to expand coverage to as many people as possible against the commitment to keeping the package revenue-neutral. It faced outside pressure from hospitals and insurers, who some thought might turn their backs on the effort if it didn’t bring tens of millions of Americans into the health insurance system.
“Almost every aspect of the bill was inextricably linked,” says Nancy-Ann DeParle, one of Obama’s top health care advisers. “Every time we tweaked the subsidies or the individual mandate penalties, CBO had to re-estimate the bill to see how it affected coverage. If CBO said that coverage decreased, that was a big problem, because the hospitals’ support for the bill was contingent on getting a high percentage of the uninsured covered.”
Trump’s own ideas about health policy do not seem to grapple seriously with these trade-offs. He repeatedly talks about covering more people at a lower cost but has offered no plan to do so.
The American Health Care Act, however, lays these issues bare. It makes different trade-offs than the ones that Democrats made. The bill would change the rules of the individual market to advantage people who are younger, healthier, and higher-income — but disadvantage people who are older, sicker, and poorer.
AHCA, for example, would allow insurers to charge the oldest enrollees five times as much as the youngest enrollees. It would allow insurers to sell less robust health insurance plans that cover a smaller percentage of enrollees’ costs.
The results are particularly grim for older, poorer enrollees — many of whom vote Republican. According to the CBO’s analysis of the plan, a 64-year-old making $26,500 would see his premiums rise by 750 percent under the AHCA. But not only are Republicans refusing to own that trade-off — they’re refusing to own any trade-offs.
“Nobody will be worse off financially,” promised Health and Human Services Secretary Tom Price on a recent Meet the Press appearance. That’s a promise no plan could keep, but that Republicans have now made, in public, and that will be played back on ad after ad after ad.
Democrats learned, over months of hard work, that there was no free lunch in health policy. Republicans are now beginning to run into the same difficult truth: Every new winner in health care comes with a new loser.
Lesson 2: Bipartisanship — can’t live with it, nearly impossible to do reform without it
The Affordable Care Act has come to symbolize intractable, unrelenting partisanship — and for good reason. The law passed without a single Republican vote. Since its passage, its approval rating has rarely dipped below 60 percent among Democrats and barely ever broken 20 percent among Republicans.
Republicans clearly don’t believe they will be any more successful at finding bipartisan support than Democrats. They are trying to pass the entirety of the American Health Care Act through the filibuster-proof budget reconciliation process — a strategy that means they won’t need a single Democratic vote in the Senate, but that also means they are limited to policy changes that are directly budgetary in nature, so they can’t rewrite insurance regulations and reform the delivery system in ways that may be necessary to make their plan work.
This is not the law the legacy Obama wanted. When he describes his law’s intellectual lineage, his frustration remains fresh.
“We said, ‘What’s a system out there that seems to be providing coverage for everybody that politically we could get through a Congress, which we can get Republican support?’” he told us.
“And lo and behold, there had been a plan in Massachusetts that had been designed on a bipartisan basis, including by a Republican governor who ultimately became the nominee for the Republican Party, that came close to providing universal coverage. I would have thought — since this was an idea that had previously gotten a lot of Republican support — it would continue to get a lot of Republican support. And yet magically, the minute we said, ‘This is a great idea, and it’s working,’ the Republicans said, ‘This is terrible, and we don’t want to do this.’”
It is easy to overstate the symmetry between the Affordable Care Act and the reforms Mitt Romney signed in Massachusetts. The ACA raised more taxes, and imposed more regulations, than Romney’s plan. But it’s also true that Obama and the Democrats would have happily traded away many of those taxes and rules for even a couple of Republican votes.
Nothing in the law frames the power of partisanship to erode bipartisanship more clearly than the individual mandate. The policy emerged in 1989 at the conservative Heritage Foundation, and Senate Republicans made it a centerpiece of their alternative to the Clinton reforms. The cross-party appeal held for decades. In May 2007, Sens. Ron Wyden and Bob Bennett released a health care plan that included an individual mandate, and it was co-sponsored by 11 Republicans. In 2009 — after Obama’s election — Chuck Grassley, the ranking Republican on the crucial Senate Finance Committee, said “there is a bipartisan consensus to have individual mandates.”
The consensus didn’t last. In December 2009, every Senate Republican — including a number who still had their names on the Wyden-Bennett bill — voted to call the individual mandate “unconstitutional.”
The Affordable Care Act, like Obama’s presidency, was built to prove the premise that with the right ideas, and the right spirit of compromise, bipartisanship was still possible in American politics. Instead, like Obama’s presidency, it proved the opposite.
In the years since the law passed, there’s been much discussion of whether some other path, some other strategy, could have broken the logjam.
Phil Schiliro, the veteran House staffer who headed up Obama’s legislative strategy, has heard the objections and run the tape back again and again in his head. “The first thing we did was have the health care summit at the White House with Republicans and industry,” he says. “The president met repeatedly with congressional Republicans to find common ground. Congressional Democrats did the same. But it didn’t matter what the cost would be, how we designed the law, or how it would work. The answer was going to be no. And at every stage the answer was no.”
It’s not Obama’s efforts that convince us of Schiliro’s point. It’s Max Baucus’s. The soft-spoken chair of the Senate Finance Committee, Baucus was a moderate’s moderate — he had broken with his party to support both George W. Bush’s initial tax cuts and the Medicare prescription drug benefit, and he was more popular among centrist Republicans like Grassley than among liberals from his own party.
Baucus tried. He tried in the Finance Committee, and then when that didn’t work, he took Sens. Grassley, Olympia Snowe, Mike Enzi, Kent Conrad, and Jeff Bingaman into a back room and, for months, tried to forge a compromise among his “Gang of Six.” But there was no compromise to be had. There wasn’t even a counteroffer to reject — the Senate’s moderate Republicans never laid out the price of their support. One reason there was no counteroffer? The GOP’s Senate leadership wanted to make sure there would be no agreement.
Mitch McConnell, the canny leader of the Senate Republicans, explained his strategy to the Atlantic. “We worked very hard to keep our fingerprints off of these proposals,” he said. “Because we thought — correctly, I think — that the only way the American people would know that a great debate was going on was if the measures were not bipartisan. When you hang the ‘bipartisan’ tag on something, the perception is that differences have been worked out, and there’s a broad agreement that that’s the way forward.”
McConnell is right about all this — he’s right that voters judge bipartisanship based on votes rather than ideas, and he’s right that keeping Republicans united against Obama’s major proposals was an effective strategy against a president who had promised a kinder, gentler political era. Imagine if 20 Senate Republicans had voted for the Affordable Care Act and praised Obama’s commitment to bipartisan ideas and governance. Imagine how powerful the campaign ads would have been, how high Obama’s approval ratings would have been — and imagine how much worse Republicans would have done in the 2010 election.
But McConnellism — which Democrats have now learned from and adopted — leaves the US political system in a fragile place. The Senate is a body that, at least under its current rules, typically requires compromise for anything to get done. But if the minority accurately diagnoses compromises as counter to their political interests, then nothing can get done.
“The question is, if the minority party absolutely doesn’t want to engage, does that mean the majority party just has to give up, even if a significant public good could be achieved?” asks Schiliro.
Now Republicans are reaping what they sowed. Having left Democrats to twist in 2009, they see little hope that Democrats will work with them in 2017. “Throughout the Obamacare debate there was always the hope of Republican support, and there were efforts, like the Gang of Six, to see whether that was possible,” says the Hoover Institute’s Lanhee Chen, who served as policy director to Mitt Romney. “We’re in a very different time now, and that does affect the process. There hasn’t been that level of outreach from Democrats. There’s no regular order possible here because Democrats don’t want to work with Republicans on this.”
This is why Republicans are using the budget reconciliation process, which hamstrings their plan from the start, rather than even trying to find eight Democrats to work with in the Senate.
If budget reconciliation becomes the norm for health reform going forward — and we see no reason to believe it won’t be — it means the boundaries of possible policymaking will be sharply limited. The process basically makes reforming insurance markets impossible. “Reconciliation was designed for minor budgetary adjustments, not major policy proposals," says Alan Frumin, the former Senate parliamentarian.
But the frustrations of this hyperpartisan reality will not be equally shared. Liberals who want to bring more of the health care system onto the federal budget will find that many of their goals can be achieved through budget reconciliation. Conservatives who want to make private insurance markets work better, and who want to build private alternatives to government-run insurers like Medicaid and Medicare, will find themselves persistently frustrated.
Lesson 3: If you change the health care system, you own it
When Democrats passed the ACA in 2010, they knew it wasn't popular — poll after poll showed pluralities, if not majorities, opposed to the legislation, after the bruising national fight that led to its passage. But Democrats had a theory about the law: As time went on, and Americans started to gain coverage, its favorability would rise.
"As that bill is enacted, it’s going to become more and more popular," Sen. Chuck Schumer (D-NY) predicted on Meet the Press in March 2010.
"I think that [the law] over time is going to become more popular," David Axelrod, then a senior adviser to President Obama, declared in September 2010.
Seven years later, that theory has been proven dead wrong: Obamacare did not become more popular as tens of millions of Americans gained health insurance coverage. One of the most stunning charts about the health care law shows month-by-month approval ratings since 2014. The numbers barely budged — until this February, when, with repeal looming, support jumped, and a majority approved of the law for the first time.
Top Democrats were astonished to see how unified Republicans remained in their opposition to the health care law, even as millions gained coverage. Whenever some part of Obamacare went wrong — when premiums, for example, spiked 22 percent in 2016 — Republicans trumpeted those failures. The White House learned, over the course of the past seven years, that they couldn’t expect a law passed on party lines to garner any praise from its legislative opponents.
“The public never heard, from those who had originally been opposed, any concession that this was doing something good,” Obama says. “That affects public opinion. Generally speaking, when Obamacare has worked well, it wasn’t attributed to Obamacare. And when there were problems, they got front-page headlines.”
Polarization almost certainly played a role in keeping Obamacare unpopular, as Republican legislators shifted rightward and saw little political benefit in compromise. White House officials felt hamstrung by the fact that they passed Obamacare with no Republican votes, which made it easier for the party to pile on — they didn’t have to worry about putting a colleague who supported the law in an awkward spot.
But top Obama administration officials look back at their own work critically, faulting themselves for not being able to sell a health insurance program covering millions.
“There’s probably a communication strategy that could have worked better than what we did, because what we did didn’t work,” Schiliro says.
One constant tension in the White House messaging strategy was over how to describe the change the new law would make to Americans’ lives. On the one hand, officials wanted to talk about the milestone accomplishment that would hugely change the lives of millions. On the other, they wanted to reassure millions of other anxious Americans that nothing would change at all.
They learned that this was a difficult line to walk, one that often resulted in sweeping promises meant to reassure the public — promises the White House couldn’t actually keep.
Most famously, Obama told Americans that if they liked their doctors, they could keep them. That promise would be quoted dozens of times over, in stories about the marketplace plans’ narrow networks that put beloved family doctors out of reach.
“For the vast majority of Americans, that will be true,” Sebelius says today. “But insurers change networks constantly. It suddenly became a promise, and now we had people saying, ‘But I have a different network.’ It was an inelegant phrase.”
Another problem: The Affordable Care Act did expand coverage to millions of Americans. But those millions of Americans made up a tiny sliver of the population. Obamacare’s wider-spread benefits — the end of annual limits in all employer-sponsored insurance, for example, or the end of cost sharing for preventive care — are harder to notice and don’t come with a sticker labeling them as part of the Affordable Care Act.
“My theory was that as the benefits became more obvious, that people would come to appreciate it more,” David Axelrod, Obama’s former chief strategist, says. “The fundamental difficulty with health reform is that … you don’t really recognize those things unless you run into them.”
Americans didn’t seem to recognize what parts of Obamacare worked, but they could see exactly which parts of the health care system didn’t seem to function well. And one of the challenges the Obama administration constantly confronted — one that held back the law’s popularity — was that anything bad that happened in the health care system got blamed on Obamacare.
If premiums spiked? That was Obamacare, regardless of the fact that premiums historically go up every year. If a doctor stopped accepting certain patients, or an employer cut a hospital out of network? Also Obamacare.
Andy Slavitt, who ran the Centers for Medicare and Medicare Services from 2014 to 2016, recalls a Roosevelt Room meeting where the president brought up this dynamic.
“The thing you’re going to have to come to grips with now is that we’ve given a name to the nebulous concerns that everybody has about their health care,” Slavitt recalls the president having said. “So if a doctor closes his office and moves a block down the road, that’s our fault.”
That dynamic, Slavitt expects, now becomes an obstacle that Republicans have to confront too. The last party to reform the health care system owns the good and the bad.
Somewhat ironically, the only thing that seems to have boosted Obamacare’s poll numbers is the threat of repeal. Recent polls have shown that more Americans than ever before approve of the health care law just at the moment that Republicans threaten to take it away. Robert Blendon, a health polling expert at the Harvard Kennedy School of Government, says this reflects Americans thinking differently about the question.
“Before, you might have people thinking, ‘I don’t like the mandate; I think it’s too expensive,’” Blendon says. “Those people who said ‘disapprove’ might not be in love with the bill, but I think now they’re thinking more seriously about what their answer means.”
Lesson 4: Benefits might not get popular, but they are very hard to take away
“I don’t think there is any question if you could start all over again, with all Americans, you would do a single-payer plan and probably have a constitutional right to health care,” Sebelius says.
It’s a line you hear often from members of the Obama administration — Obama included. “If I was starting from scratch I would have supported a single-payer system, because it’s easier for people to understand and manage,” he told us. But, he continued a bit ruefully, “we weren’t starting from scratch.”
For reformers of all ideologies and all approaches, this is the hardest fact of health reform: We aren’t starting from scratch. Any system you build needs to be a compromise with the system we have — a system that provides insurance to more than nine in 10 Americans, a system that employers know how to navigate, a system the medical care industry has designed itself around.
In 2008, one of us (Ezra) set out to re-report the failure of Bill Clinton’s 1994 health reforms. After interviewing dozens of participants and reading thousands of pages on the effort, the core mistake seemed clear: The Clinton administration had tried to change too much, too fast. Its bill would have taken the system we had and replaced it with something completely new. Americans are protective of their health insurance and mistrustful of the government.
Jacob Hacker, a Yale political scientist who wrote his dissertation on the Clinton administration’s failed effort, distills the problem well. "When it comes to health care, it's one thing to make the system better,” he says. “It's a whole other to remake it entirely. You can ask Americans to walk forward, slowly, knowing they can scramble back to the ledge if need be. You cannot ask them to jump.”
Fifteen years later, the Obama administration launched its effort with the lessons of the Clinton reforms in mind. Its political lead, Chief of Staff Rahm Emanuel, had been around for the 1994 disaster and hadn’t forgotten a moment of it. The Obama White House resolved to do things differently this time.
Where the Clinton administration had built its bill in secret, the Obama administration would hand the process to Congress. And where the Clinton administration had tried to change as much as possible, the Obama administration would try to change as little as possible while still creating a universal, or nearly universal, health care system.
Thus the design of the ACA was incremental, even if its ambitions weren’t. Save for some spending cuts, it left Medicare coverage mostly alone. It left the massive employer-based insurance market mostly alone. It expanded Medicaid coverage to more people. The big changes it made were to the messy individual insurance market, where the administration added protections for preexisting conditions, regulated marketplaces where insurers would compete for consumers, subsidies for lower-income Americans, and the individual mandate to buy health coverage. But even here, the Obama administration tried to be careful — it allowed existing plans to “grandfather” into the new system.
This was the backdrop of, “If you like your health care plan, you can keep it.”
Even so, the Obama administration was changing at least part of the health care system. In 2013, about 4 million Americans saw their plans canceled because they were noncompliant with Obamacare’s regulations, and because they hadn’t followed the strict, complex regulations that governed the grandfathering process. The outcry was swift and severe. PolitiFact voted “If you like your health care plan, you can keep it” its lie of the year. Obama ultimately had to apologize for the chaos. “I am sorry that they, you know, are finding themselves in this situation, based on assurances they got from me,” he said.
The administration lost its fight with the health care status quo. Change proved scarier than stasis, and Obamacare’s popularity never recovered from the public’s fear of what they might lose, or did lose.
Now, though, Obamacare is the status quo. Tens of millions of Americans rely on it for health insurance they fear losing.
This is the reality Republicans are facing, and quickly coming to fear. Take the Medicaid expansion, which the House Freedom Caucus says must be repealed in any Obamacare alternative. Twenty of the 52 Republican senators come from states that have expanded Medicaid. Sixteen Republican governors lead states that have expanded Medicaid. The reality of what it would mean to take Medicaid coverage from that many people, and Medicaid dollars from that many hospitals, is quickly becoming clear to Republicans.
Rep. Phil Roe is a Tennessee Republican charged by the conservative Republican Study Committee with drafting the group’s Obamacare replacement. “What I thought was going to be easy was, I thought Medicaid, we’d just block-grant it to the states,” he told us. “That one actually is going to be a little harder than I thought. The reason is there are states like New York, states that expanded [Medicaid]. How do you cover that 10 or so million people on Medicaid?”
The new Republican plan struggles mightily with that reality. It keeps Obamacare’s Medicaid expansion until 2020 — even allowing new states to sign up — and then freezes the expansion and cuts overall program spending thereafter. The result, according to the Congressional Budget Office, is that by 2026, 14 million fewer people would be on Medicaid than would be true under Obamacare. But it’s not just Medicaid: CBO projects the individual market will see 2 million fewer enrollees, and that employers will offer insurance to 7 million fewer people.
But disruption to the status quo isn’t a binary question of insurance or no insurance. Beyond the coverage numbers, the leaner subsidies and new age-rating regulations will mean many who have insurance they like and can afford now will have to switch over to insurance that costs them more, covers less, and leaves them furious with the Republican Party. Obamacare canceled 4 million plans, and the outcry was massive. The GOP’s bill is going to drive people out of tens of millions of plans, and the outcry is hard to even imagine.
Lesson 5: Partnering with the private sector, and private insurers, can be risky — in a way expanding government-run programs isn’t
The Affordable Care Act included two coverage expansions: one through Medicaid, the 50-year-old insurance program for low-income Americans, and another through new marketplaces, where middle-income Americans could use federal tax credits to buy coverage.
The marketplaces, the focus of more publicity and promotion, have consistently underperformed expectations. Republicans want to keep a form of this program, continuing to give Americans tax credits to purchase private plans.
The Medicaid expansion, meanwhile, launched with little fanfare — and it has proved more successful than anyone thought.
“The Medicaid expansion works very well, but nobody likes to talk about it,” says Drew Altman, president of the Kaiser Family Foundation. He recently ran focus groups of people on the marketplace. He was surprised to find that “many on the marketplaces would prefer to be on Medicaid. It was a pretty striking contrast.”
Three years ago, health economists believed Obamacare’s soon-to-launch marketplaces would grow to replace much of America’s fractured, complex employer-based health insurance system.
Predictions for the employer-sponsored insurance system’s collapse ran rampant. The question around companies shifting workers to the new public marketplaces was often framed not as if but when. Zeke Emanuel pegged it at 2025. Jonathan Gruber estimated 2050. Republicans warned of widespread “employer dumping.”
You don’t hear those predictions anymore.
Three major health insurers — Aetna, UnitedHealth, and Humana — have soured on the marketplaces, sharply reducing participation or pulling out entirely. One-third of counties had just one insurer selling coverage during the last open enrollment period.
Obamacare was meant to be the beginning of America’s transition to a new health care system — it was common in those days to hear the law spoken of as a "platform" or "a first step." Instead, Obamacare is proving to be something much more familiar, and much more limited.
The Congressional Budget Office estimated in 2014 that the marketplaces would have 23 million enrollees by now. Instead, they’re hovering around 10 million.
“We had expectations about how quickly people would transition to a different marketplace,” says former Health and Human Services Secretary Sylvia Mathews Burwell. “We would have liked to have seen people do that faster.”
There are lots of explanations for why the marketplaces haven’t performed as well as expected. Health insurers gripe that the Obama administration’s regulations constantly changed and were impossible to succeed under. Certain policies meant to stabilize the market in nascent years didn’t work as planned. Politics may have played a role too. There is significant evidence that Aetna pulled out of the marketplaces, for example, in retaliation for the Obama administration denying its merger with Cigna.
Large employers, meanwhile, turned out to be much more hesitant to drop coverage than economists had expected. They had become accustomed to providing this as part of a benefit package and, after Healthcare.gov’s disastrous rollout, were not enthusiastic to send their workers into a brand new marketplace.
There is no evidence that Obamacare led to a decline in employer-sponsored coverage. One reason the marketplace has had lackluster enrollment is that big companies simply decided to keep buying their workers coverage.
No matter which explanation you believe, the lesson here is clear: There are risks to working with private partners. If they decide not to participate in an insurance expansion, there isn’t much the government can do except beg and plead — which the Obama administration has had to do in a few cases, when some counties had no insurers at all.
Obamacare’s Medicaid expansion, meanwhile, has been a quiet success. In 2015, CBO estimated that an average of 14 million people annually would gain coverage through that provision over the next decade. But in early 2016, the agency revised its numbers significantly upward, estimating that 18 million would enroll in coverage each year.
Medicaid was never legislators’ first choice when they thought about how to expand coverage. But because Medicaid pays doctors less than other programs, it was a cheaper way to cover millions of Americans. Democrats couldn’t afford a bill that expanded more expensive private insurance to everyone, so they included Medicaid as a significant source of coverage.
The program often gets maligned in Washington for not offering as much doctor choice as private insurance. But here’s the surprising thing about Medicaid: Even so, most enrollees are really happy with their coverage. They pay no premiums and face pretty small copays when they go to the doctor or fill prescriptions.
A recent survey from the Commonwealth Fund found that Medicaid enrollees are more likely to report being satisfied with their coverage than those on the marketplace. Fifty-one percent of Medicaid enrollees said they were very satisfied with their plans, and 37 percent somewhat satisfied.
“It’s good insurance,” says Brandon Bolton, a 26-year-old dishwasher in Corbin, Kentucky, with whom one of us (Sarah) spoke on a reporting trip last winter. “I was able to go to any doctor I wanted, I didn’t have to pay nothing — no medicine fees, no copays, nothing.”
Bolton never had insurance before Kentucky expanded Medicaid. He couldn’t afford to take his prescriptions for multiple mental health conditions, including ADHD and obsessive-compulsive disorder.
“I was actually able to go to the dentist, get my teeth cleaned and checked, get my cavities taken care of, and get the meds I need to help stabilize a bit,” he says.
Others in Kentucky who used the marketplace saw people like Bolton and got jealous — they wanted the plans without deductibles and lower premiums, which seemed like a better deal than what marketplace enrollees could afford on the exchange.
“They can go to the doctor for anything, but I wouldn’t even think about it with my deductible,” one marketplace enrollee, who asked that we not use their name, observed.
Along with their Medicaid enrollment freeze, Republicans plan to make a second go at working with private plans to expand coverage through the individual market. They will continue to offer tax credits for those who purchase plans there. These tax credits are much smaller than those offered under Obamacare and, particularly in rural areas where coverage is expensive, will not go far toward buying a plan. The Republicans will see if they, unlike the Obama administration, can turn an industry accountable to shareholders into a willing partner.
Lesson 6: Affordability doesn’t mean what Washington thinks it means
On March 5, 2009, Obama invited key legislators from both parties to a White House summit on health reform. McConnell was there, and so was Harry Reid. An ailing Ted Kennedy attended, as did Grassley, the ranking Republican on the powerful Senate Finance Committee.
These were the heady, early days of health reform, the days when bipartisanship seemed possible and agreement seemed near. And so Obama made his argument — an argument built to appeal to both sides of the aisle.
“Medicare costs are consuming our federal budget,” he said. “I don't have to tell members of Congress this. Medicaid is overwhelming our state budgets. I don't need to tell governors and state legislatures that.”
This was the argument the White House thought would win them the day. Republicans and Democrats didn’t agree on much, but both sides worried about the exploding federal budget deficit, and both sides knew skyrocketing health care costs were the core problem. Health reform, Obama promised, would “bend the cost curve” — it would slow the rise in health costs that was straining both government and corporate budgets.
The White House thought they had found a unifying thread within health reform: Republicans and Democrats, businesses and state governments, people and providers — everyone was worried about costs. And so the Affordable Care Act was thick with policies meant to push people toward lower-cost plans and keep deficits under control.
The subsidies were designed to push people into cheaper plans on the insurance exchanges. Medicare was given a board empowered to make sweeping, unpopular reforms to keep costs down. The law included a tax on expensive, employer-provided insurance plans. Democrats made sure the whole thing was paid for by raising taxes on the rich and cutting more than $500 billion in Medicare spending.
The changes appear to have worked. Systemwide costs have been growing at their slowest rate in recorded history — an achievement that is not solely attributable to Obamacare, but has been helped along by it. The Congressional Budget Office now thinks the federal government will spend less on health care in the coming years, even with Obamacare, than it thought it would spend before Obamacare passed. Exchange insurers have pushed hard into plans with narrow networks and high deductibles.
This is how the cost curve bends. If you had described this reality to Obama administration officials on the day of the law’s passage, they would have celebrated.
But people hate it.
The narrow networks and high deductibles are among Obamacare’s most-loathed features — a Kaiser Family Foundation poll found that 70 percent of Obamacare enrollees with high-deductible plans judged their insurance only a “fair” or “poor” value, while that number fell to 37 percent among enrollees with low-deductible plans. The Medicare cuts and tax increases have been powerful issues for Republicans on the campaign trail. The tax on expensive, employer-provided insurance plans is so unpopular that both Bernie Sanders and Hillary Clinton promised to kill it.
It is rare for a policy to work so well in practice and fail so totally in popular opinion. But Obamacare ran into the paradox of cost control: The policies that control costs are the policies people hate most. At the core of that paradox is confusion about what different groups mean when they talk about cost control.
When economists in Washington say they want to control health care costs, they mean something like this: People should buy less health care, or cheaper health care, so that total spending on health care falls.
When voters say they want to control health care costs, they mean something like this: Someone else should pay for my health care so I can purchase what I need without much financial strain.
“People wanted the cost curve bent for themselves, and Washington wanted the cost curve bent in overall health care spending,” says David Axelrod. “This was, believe me, a discussion within the administration. As a guy who is closer to the politics of it, I was excited about the notion of bending the cost curve for people. The green-eyeshade guys had a whole different concept.”
What’s crucial to understanding the public’s perspective here is that the bulk of health insurance costs in America are paid for by someone else. On average, employers pay about 70 percent of the cost of their employees’ health care. Medicare and Medicaid cover an even higher percentage than that. This is what good health insurance has come to mean in this country: generous coverage that’s paid for by someone else.
This drives economists crazy. They note that someone is always paying. With Medicare and Medicaid, it’s taxpayers. With employer-based insurance, the money is coming out of wages. And because individuals don’t feel the full cost of their health care expenses, they spend more than they otherwise might, raising costs for everyone.
“We can’t get health care for free,” Obama told us when we asked him about the tension between controlling costs for individuals and controlling costs for the government. “You’re going to have to pay for it one way or another. Either the government will pay more, so people don’t have as many out-of-pocket costs — and that means, in some fashion, higher taxes for somebody — or individuals will have to pay more out of pocket, in one way or another.”
But given the options on the table, it’s worth asking if perhaps the government should have paid more. Democrats built Obamacare with a number of artificial strictures. One was that the law could only cost $1 trillion over 10 years — a number chosen arbitrarily to reduce sticker shock, though it clearly didn’t work. Another was that the law had to be paid for in its first 10 years.
Not everyone involved in its drafting thinks those constraints were worth the trade-off of lower subsidies, higher premiums and deductibles, and assorted unpopular spending cuts and tax hikes.
“What people mean by ‘affordability’ is that they want a low premium,” says Zeke Emanuel. “That’s been our Achilles’ heel. The big issue there is we just weren’t generous enough with the subsidies. We should have spent more.”
Perhaps the more fundamental issue is that both Democrats and Republicans are committed to controlling costs by making insurance harder to use and health care expenses more transparent for patients. That’s not how other countries with lower health care costs find their savings.
“If you think about how much other countries spend, there’s basically no correlation between their spending and out-of-pocket costs,” says Hacker, the Yale political scientist who has done extensive work on health care politics. “What drives it is the strength of government bargaining power. But that’s not accepted even among liberal health policy experts in the US.”
This is a lesson Republicans aren’t learning. The AHCA cuts both the size of the subsidies and the generosity of what counts as insurance. The result will be people paying more to receive less. Some plans, for some people, may sport lower premiums, but those lower premiums will come with eye-popping deductibles and copays, and the diminished tax credits will make the price tag hurt more for most. The CBO says the law cuts the deficit by more than $300 billion, but it does so by kicking 24 million people off health insurance.
This won’t be popular, and Republicans know it. Over and over again, they have zeroed in on the high copays and deductibles in Obamacare as a key source of discontent. In a January interview with the Washington Post, Trump promised “insurance for everybody” with “much lower deductibles.” That same month, McConnell complained that “Americans who actually did get insurance when they did not have it before have really bad insurance that they have to pay for, and the deductibles are so high that it’s really not worth much to them.”
Republicans were right that this was one of Obamacare’s core weaknesses. But they have never figured out how to bridge the distance between their opportunistic criticisms of the law and the basic fact that their plans lean harder into high deductibles, high copays, and letting people who can’t afford good insurance get by with bad insurance. Their plan makes the most unpopular parts of Obamacare worse, and they will own the results.
Lesson 7: Prices are the fundamental challenge in American health care — and reform will remain an exasperating exercise until that changes
There is, of course, a way to make health care affordable to the government and its citizens: Regulate American medical prices.
Health care in the United States is expensive. Ridiculously, outlandishly expensive. We spend $2.8 trillion on health care annually, more than any other country.
The reason we spend so much money isn’t because we go to the doctor a lot. On average, Americans actually see the doctor slightly less than people in other developed countries.
The reason American health care is expensive is because when we go to the doctor, it costs more than when someone in Canada or England or France or any other developed nation goes to the doctor.
Other developed countries use price controls in medicine. The government negotiates with drug companies and device makers and doctors to set lower prices. The government is buying in bulk, and has the power to win those negotiations. These countries regulate medical prices akin to how they regulate the price of electricity or water: a service that everyone needs at reasonable price, but would face significant difficulty bargaining for on their own.
The United States does set medical prices for the 50 million elderly Americans who rely on Medicare. The government-run insurer has a fee schedule that says exactly what doctors can bill for every visit or checkup — and usually ends up with lower prices as a result.
But for the 155 million Americans who get coverage through their employers — and 22 million in the individual market — that task is left to the insurers and customers. We are not very good at it.
We recently spoke with Todd Anderson, a father in the Philadelphia area, who told me about a trip his son recently made to the emergency room after cutting his finger with a knife while doing dishes.
His son is a college sophomore; his son’s roommate, a biology major, said that he’d recently used the knife to cut raw meat and drove him to the emergency room.
The physician assistant at the emergency room examined the son’s finger and treated him with liquid stitches and a bandage. A few months later, Anderson received $2,237 in two separate bills — one for $1,032 from the hospital, another for $1,438 from the doctor — for the Band-Aid and its application. The doctor group charged the Andersons for two days in the emergency room, because the late-night visit began around 11 pm and ended around 1 am.
“I feel like I’m being told to pay the hospital and the doctor for the exact same service, and no one has been able to explain to me why it can possibly cost this much,” Anderson says.
These types of bills just don’t happen in other countries, where the government negotiates with providers to set a reasonable fee for what a Band-Aid delivered in an emergency room can cost.
“The issue of prices needs to be put on the table,” says Altman, the president of the Kaiser Family Foundation. “A lot of the effort right now is aimed at reducing volume of care, not price of care. But what people are more concerned about is their out-of-pocket costs.”
The Affordable Care Act did not aim to regulate health care prices in the United States. Instead, it emphasized reducing the volume of health care in the United States. It tried to get rid of the financial incentives of a “fee for service” system that pays doctors for every test or procedure, regardless of whether it's actually necessary.
Obamacare had dozens of experiments that aimed to move the health care system to a “pay-for-value” system, where doctors would be rewarded for making patients healthier — not just providing medical services.
Some of these experiments have been successful. Unnecessary readmissions to hospitals, which the health care law began penalizing in 2013, have plummeted. There is some evidence that these programs have led to slower health care cost growth too.
None of these changes put the United States on the path to having health care costs more in the neighborhood of Canada or France or other developed nations. That’s just really hard when an MRI costs, on average, $1,119 here — but $503 in Switzerland or $215 in Australia.
The United States pays health care workers much more too. Nine of the 10 top-paying jobs in the United States are different medical specialties. American orthopedic surgeons earn an average of $442,000 — three times as much as what their counterparts in France earn.
Regulating health care prices was never a serious part of the Affordable Care Act debate. The Obama administration made a conscientious decision, at the start of its health care effort, to get all major industry groups to stand behind the law — or at least not work against it. Regulating health care prices would have meant that hospitals, doctors, and pharmaceutical companies would all earn less. The idea was a nonstarter.
But America’s high health care prices are at the core of what Obamacare enrollees dislike about the program. High prices mean high premiums and big bills when customers remain in their deductibles, the two parts of the law that get the lowest favorability ratings from those who rely on the marketplaces for coverage.
Trump has shown some interest in regulating health care prices, particularly in allowing Medicare to negotiate drug prices. Any serious effort to constrain health care prices would likely need to go far beyond pharmaceuticals, which make up 10 percent of American drug spending annually. To prevent $2,237 bills for Band-Aids, you’ve have to tackle the rest of the health care system — and that is not something either political party has proposed.
“It’s the cost issue that will continue to drive us crazy,” says Bill Hoagland, a vice president at the Bipartisan Policy Center who previously worked as budget director for Sen. Bill Frist (R-TN). “I don’t know how Republicans put together a package that reduces the deficit that doesn’t focus on price. Doctor costs, hospital costs — that’s where we have to focus our attention.”
They aren’t yet — at least not in their replacement bill.
The test: What comes after Obamacare?
In September 2009, President Obama called a joint session of Congress to sell his health reform bill. “I am not the first president to take up this cause, but I am determined to be the last,” he said.
He will not be the last.
But those who come after Obama would be wise to heed the lessons of his health reform effort. For Democrats, those lessons are relatively straightforward. It is easy to imagine the next Democratic president passing a health care bill that does four things: expand Medicaid coverage up to 200 percent of poverty, boost subsidies in the exchanges, add a public option that can use Medicare or Medicaid’s pricing power, and let people above age 50 buy into Medicare.
A bill like that could pass the Senate with 51 votes, it would build on what has worked both in America and elsewhere, and it would be straightforward for the government to administer and voters to understand.
Obama’s successor, however, isn’t a Democrat. Trump has often hinted at expansive instincts on health care, praising Canada’s single-payer system, promising he wouldn’t cut Medicaid or Medicare, worrying that the government is getting ripped off by hospitals and pharmaceutical companies, and telling 60 Minutes that “everybody's going to be taken care of much better than they're taken care of now” and “the government’s gonna pay for it.”
The plan he has lashed himself to cheerfully breaks those promises, and it is unclear whether Trump realizes it. The AHCA replaces Obamacare while learning nothing from its difficulties. It covers fewer people with less generous insurance, relies on complex arrangements with private insurers, does nothing to address the high prices that drive the cost of US health care, and is being rushed through a hyperpartisan process that ensures Democrats will unwind it as soon as they have the power to do so.
These problems reflect a larger issue the Republican Party must resolve. The Democratic Party’s basic health reform goal is to tax richer people to provide generous insurance to poorer people. This is a broadly popular aim, and many of Obamacare’s problems come because Democrats didn’t lean into it hard enough. The Republican Party’s goals are more diverse, and often less popular.
Fundamentally, Republicans are suspicious of high levels of redistribution in the health care system and frustrated by generous plans funded by third-party payers. GOP proposals tend to envision a health care system based around catastrophic plans and health savings accounts, where people are protected from financial calamity, but otherwise are pushed to shop cautiously for care, and must make do when they simply can’t afford it at all. Republicans want a market where consumers push the cost of health care down, and one reason they push the costs down is because they often can’t afford the pricier options.
There are reasonable arguments for the conservative health care vision, but Republicans don’t make them. Instead, they have attacked Obamacare for being insufficiently generous, for covering too few people, for canceling plans people relied on, for failing to solve the problem of affordability in health care.
While all these criticisms are correct, the Republican replacement plan will make them worse. If it passes, voters are going to find that out, and the reckoning will be severe.
This, above all, is the lesson Republicans need to learn from Obamacare: Don’t overpromise, and don’t mislead.
To the extent that Republicans have a different vision of health care than the Democrats or even the voters, they need to be making that case, and building consensus around a health care system that offers less so it can cost less and tax less. Building that system while promising the opposite will result in disaster, both for them and for the voters who rely on them.