On a steamy Tuesday this September, Republicans and tea-party groups, eager to drum up support for killing the 2010 health care law now that Congress had returned from its August recess, gathered for a noon rally on the Capitol’s West Lawn. Crowds arrived by bus from neighboring states for the “Exempt America From Obamacare” protest, and a parade of Republican members of Congress bestrode the dais.
Democrats had held their own event, a 10:15 a.m. press conference on the Senate side of the Capitol Visitors Center, to denounce the GOP’s efforts to “sabotage” the law. Republican lawmakers David Vitter, a senator from Louisiana, and Rep. Ron DeSantis of Florida riposted with a 3:30 p.m. press conference in the “Senate Swamp” on the northeast side of the Capitol to introduce legislation requiring Washington officials to purchase their health insurance through the law’s new online marketplaces and deny them certain federal subsidies. It was a presser-rally-presser sandwich—enough to dizzy a Washington health care reporter.
The political war raging over the Affordable Care Act is unprecedented—and unlikely to abate soon. The GOP has spoken out against what it says is a costly, privacy-invading, job-killing law, even before its central provisions have been implemented. Democrats defend the ACA, arguing that the nation’s inefficient, unfair, and costly health care system had to be changed. Come October, as the law is implemented, dueling anecdotes of triumphs and tribulations will no doubt feed both parties’ message machines.
The reality on the ground will be more nuanced. Yes, the Affordable Care Act is a big-bang moment for the nation’s health care system, and it has few historical precedents. Everything will look a little different after the law’s core provision—the individual mandate for health insurance—goes into effect on Jan. 1, 2014. But despite the apocalyptic rhetoric, the law is hardly the most disruptive health care makeover America has seen. At least not yet. It comes with a big question mark that, over time, could alter the nation’s health care system—and culture—forever.
NOT THE FIRST
When the clock strikes midnight on Dec. 31, nearly all Americans will be required to have health insurance or pay a penalty. New rules will shape how and where people buy their coverage. Seven million are expected to purchase insurance plans through the exchanges next year. Employers have a 12-month reprieve before they must ensure that the coverage they offer their employees meets minimum affordability and value standards. The law’s overall goal is to expand the public’s access to health care without sacrificing quality. It’s a lofty, transformative aim.
But hardly the first, or even the biggest, transformation. From the early days of doctors making house calls, to the first cooperatives offering insurance, to the rise of employer-sponsored health benefits, followed by the introduction of Medicare and Medicaid, the decade of health maintenance organizations, and the Medicare Part D prescription-drug benefit of 2003—the U.S. health care system has been in a near-constant state of flux. Two overhauls were more radical than Obamacare will be next year: the dramatic rise of employer-sponsored insurance during the World War II era, and the adoption of Medicare and Medicaid in 1965.
In the 1930s, business owners began offering a form of insurance to their workers, signing prepaid contracts with physician groups to care for their employees. The war’s wage-and-price controls accelerated the trend; fringe benefits such as health insurance, which weren’t limited by law, could be used to attract workers when salary could not. After WWII, unions’ collective bargaining for health coverage—as well as an Internal Revenue Service ruling in 1954 clarifying that premiums paid by employers were exempt from income taxes—contributed to the surge in the number of employees who received health coverage through the workplace.
This transformation had several important consequences. David Blumenthal, then a Harvard Medical School professor, wrote in 2006 that employer-sponsored insurance “has provided the essential underpinning of an insurance system by creating work-based risk pools, in which healthy, low-risk participants subsidize the health costs of sick, high-risk participants.” But it also had the effect of shielding people from the cost of their care. People no longer had to reduce spending for medical care during tight financial times, because the money that paid for their coverage didn’t come directly from their pockets—premiums were just deducted from their paychecks. “The biggest consequence is the obscuring of the true cost of health care from those who ultimately pay it,” says Paul Starr, a sociologist at Princeton University whose 1982 book chronicling the history of American medicine won the Pulitzer Prize. “I think that created the single largest source of pressure for rising health care costs.”
The decade following the IRS clarification on the tax status of employer-sponsored insurance brought two even more dramatic forces: Medicare and Medicaid. The introduction of Medicare in 1966, which overnight guaranteed health care for people age 65 and up, came with doomsday rhetoric (Medicaid was adopted more slowly). Some worried that a huge influx of newly covered patients would overtax hospitals. “Medicare May Result in Severe Hardships” the New York Herald Tribune warned in a headline before the bill passed. The newspaper (not unreasonably) fretted about a serious shortage of doctors and hospitals: When President Johnson signed the Social Security Amendments of 1965 into law, 18 million seniors became eligible for Medicare coverage overnight, with benefits beginning July 1, 1966.
The Associated Press unleashed a herd of reporters to hospitals across the country to document the law’s first day in effect; they found that implementation went smoothly, with paperwork being the biggest challenge. (Among the few additional problems noted was “one woman who got mad and swung her purse at a hospital worker,” apparently upon being informed that Medicare wouldn’t cover all of her health expenses. Another woman refused to produce her Medicare card until she could unpin it from her underwear in the privacy of the restroom.) In 1965, only about half of the elderly population was covered by health insurance; by 1967, nearly 100 percent had insurance. Bang.
It was the volume of patients rather than the substance of the coverage that made Medicare such a radical change for the health care system. Medicare plans were designed to mimic the popular Blue Cross Blue Shield insurance of the 1960s, not to tell doctors what to do. Even the statute made this clear: “Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided.”
Nevertheless, the impact was massive. Physicians saw more demand and fewer nonpaying cases. Amy Finkelstein, an MIT economist, found that the introduction of Medicare led to higher “treatment intensity”—more money spent per patient, per day—greater hospital spending, and faster adoption of new technology inside hospitals. “The estimated effects are large,” Finkelstein wrote in 2005.
The law’s greatest unintended consequence was its soaring price tag. Joseph Califano Jr., who was Johnson’s adviser and later became secretary of Health, Education, and Welfare, recalled that at the time, the focus was on access rather than cost. “In order to neutralize physician opposition, we agreed to pay doctors their ‘reasonable, customary, and prevailing fees,’ ” he wrote in 2009. It was akin to having doctors write their own paychecks. In the first 10 years alone, spending on the program climbed from $4.9 billion to $22.9 billion. Last year’s bottom line was $574 billion to cover the country’s 50 million Medicare enrollees.
The health reforms of the ensuing decades were more incremental. President Reagan changed the way Medicare reimbursed hospitals with the introduction of a “diagnosis related group.” President Clinton attempted to install universal health coverage early in his first term, but the effort collapsed, and the biggest change wrought in the 1990s was the surge in health maintenance organizations, which were devised as a means of maintaining quality health care while controlling costs. They did have a large impact on the system at the time, but managed care fell out of favor dramatically at the end of the decade. In 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act, which allowed seniors to buy drug coverage on top of their other care, beginning in 2006. As with original Medicare, millions gained coverage virtually overnight in 2006, when the benefit went into effect.
A BIG BUT UNCERTAIN CHANGE
President Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010. It sits somewhere near the introduction of employer insurance benefits and the passage of Medicare in the scheme of massive policy changes that have reshaped health care: a big-bang moment followed by a question mark. “This is going to have a more gradual impact on care, on care delivery, and on coverage,” Mark McClellan, who was head of the Centers for Medicare and Medicaid Services during the Part D rollout, says of Obamacare. “It’s not going to be the case like it was in Medicare in 1965 or Part D in 2006 that, you know, at the end of the first year, you’re basically done.... This is going to be a several-year process.” The Congressional Budget Office estimates that 7 million Americans will sign up for coverage on the exchanges in 2014, and 25 million will do so by 2019.
The heart of the Affordable Care Act is a “three-legged stool,” but the Supreme Court partially kicked one out leg in June 2012. The three legs are insurance-market reforms, such as the prohibition against denying coverage to people with preexisting conditions; the individual insurance mandate; and the subsidies and Medicaid expansion intended to make health coverage affordable. Last summer, the Supreme Court ruled that Washington cannot require states to expand their Medicaid programs for low-income residents. This has muted the “bang” nature of the coverage expansion, because an estimated 7 million people will remain uninsured in the 25 states that have currently declined to widen their programs.
For the majority of the country (roughly 316 million Americans), little will change Jan. 1. “This is something which is coming in and having a profound influence on the lives of a small minority of Americans, and leaving most Americans unaffected,” says Jonathan Gruber, an MIT economist who advised both Obama on the ACA, as well as then-Gov. Mitt Romney on Massachusetts’ health reform in 2006. Life won’t feel very different for the person who continues to get her insurance through her employer. Undocumented immigrants will continue to live without coverage. Some folks will get caught in a coverage gap, thanks to the Supreme Court decision. The law assumed that states would cover residents earning up to 133 percent of the federal poverty level under the Medicaid expansion, and it offers subsidies on the exchanges for people who earn between 100 percent and 400 percent of the poverty level. But Texas, for example, opted not to expand its Medicaid program, and it covers working parents earning up to only 25 percent of the poverty line. So some residents will be too rich for Medicaid and too poor for subsidies, even if their annual salary just barely tops $5,000 a year for a family of three.
The insurance reforms and coverage expansion will ripple through the system in some significant ways. Insurance companies will be working under a whole new set of rules; they will now have to offer plans with a minimum level of benefits, and some plans offering just a few benefits will go away. Insurance companies have gained millions of new customers, but insurance brokers fear that the new exchanges jeopardize their jobs, in the same way that websites like Expedia threaten travel agents, Starr says.
Doctors will also have new patients—and paying ones, at that. This is both good and bad. As with Medicare, the coverage expansion has exacerbated concerns over a national physician shortage. The Association of American Medical Colleges estimates the nation will be short 91,500 physicians by 2020, partly because of the Affordable Care Act. To address this deficit, a debate is taking place in the medical community over the scope of duties that nurses should be permitted to perform. But even as more Americans seek care, hospitals will also lose reimbursements for treating uninsured patients, whose numbers will dwindle under the law, although not as much as originally expected, and this loss will counter some of the benefits for hospitals of treating a more broadly insured population.
Alexander Li, the CEO of the ambulatory care network for the Health Services Department in Los Angeles County, says his staff isn’t preparing for huge changes come Oct. 1, when the rollout of the insurance exchanges begins. The ACA won’t solve his staff’s biggest headache—the paperwork associated with patients who receive insurance from a large range of providers. But his network, which manages the county’s outpatient clinics, among other services, is preparing its staff to be more patient-centric as health care consumers gain freedom under the law. “I think, for us as a safety net, it means that just like everyone else, we now have to work hard to be customer-friendly and retain our patients, because now they have a choice to leave,” Li says. His staff is being trained to nurture relationships with patients, who may more regularly seek care once they have coverage but who can now seek care outside of the safety-net hospitals that specialize in caring for the uninsured.
Despite these effects, Gail Wilensky, who directed the Medicare and Medicaid programs from 1990 to 1992, says that with passage of the ACA, “we took on the easy part.” “It’s not politically easy, but it’s the technically easy part of health reform. It’s not health care reform at all. It’s coverage expansion,” she says. In other words, it changed who was insured, not how much their care costs.
The law, however, opens the door to tackling some of those technical care-based challenges through a number of experimental provisions. The Affordable Care Act has no Medicare-style preamble declaring that it won’t change the practice of medicine. “There are seeds within the ACA of a restructured delivery system that could—and I emphasize ‘could’—over time really change the way we get care, and that would affect everybody,” says Stuart Altman, a professor of national health policy at Brandeis University. Those are the attempts to “bend the cost curve.” And it’s a steep curve: Health care spending currently makes up 18 percent of the nation’s gross domestic product.
The law created an “Innovation Center” at CMS to test and assess new payment structures and methodologies for Medicare, Medicaid, and the federal Children’s Health Insurance Program. It established a Medicare pilot program that will be expanded in 2016 if it demonstrates that bundled payments to providers can improve the quality of care while bringing down costs; the law also established similar bundled-payment demonstration programs for Medicaid. Doctors can participate in new, voluntary “accountable care organizations,” or ACOs, and be rewarded for meeting certain standards of care for their patients while coordinating with their other health care providers. States can receive “innovation waivers” in 2017 if they demonstrate new ways of providing coverage that’s as good as that under the ACA.
How these experiments fare will determine just how transformative Obamacare will be. “It’s one thing to have a lot of pilot projects, and it’s another thing to have that actually become the law of the land and change the way things are done,” says Wilensky, who is now a senior fellow at Project HOPE, a nonprofit that works to make health care accessible for people around the world.
Perception matters, too. “The mere fact that individuals are not going to be rated on the basis of their health—that is a very fundamental change,” Starr says, referring to the law’s ban on turning away people with preexisting or other conditions that previously made insurance coverage unaffordable or unavailable. “If the Affordable Care Act affects the way Americans think about health insurance, then it will have brought about a very big change.” That is, of course, a big “if.”
If a presidential candidate ran on a platform of eliminating Medicare and Social Security, “they’d be seen as crazy,” Starr says. “It would so destabilize the institutions of American society that it, you know, it’s just not possible. But I don’t see the Affordable Care Act as getting entrenched to that degree. It doesn’t cover enough people, and it’s being implemented under different names in different states.” The insurance exchange in Kentucky, for example, is called kynect; Oregon’s is dubbed Cover Oregon. Neither bears government branding. “There’s reason to be skeptical as to whether it will have that kind of staying power that other policies have had,” Starr says.
Obamacare is unique in that regard. Although the health care system has tended to initially shun rather than embrace policy changes, experience shows that participants tend to come around before too long. The American Medical Association has a long history of resisting just about every major health care shift, including prepaid group plans like the ones adopted by employers early on. The physicians’ organization opposed Medicare until a clever trap set by President Johnson forced AMA President James Appel to support the law in front of the White House press corps. The group’s fierce opposition—which it said was based on concern that doctor-patient relationships would suffer, but which also seemed to include concerns the government would interfere with doctors’ ability to charge their customary rates—was unfounded. Physicians no longer had to treat as many patients who couldn’t pay their bills, and Medicare allowed them to set their own rates. The AMA has long since embraced the program.
With the Affordable Care Act, the AMA didn’t put up that initial resistance, declaring its support for the Senate bill in December 2009, three months before Congress passed the legislation. The group has since stated that the law “includes many major provisions that are consistent with long-standing policy adopted by the AMA House of Delegates.”
The provider community has been more receptive to the ACA than to previous changes, which speaks to the law’s nonradical core. Resistance has instead come largely from the political and business communities. The pushback—and its continued intensity three years after the law’s passage—is unprecedented. “I don’t think we’ve seen anything like it since ‘massive resistance’ to school desegregation in the South years ago,” says Henry Aaron, a Brookings Institution economist and health care expert.
Aaron worries that if the opposition succeeds, it could hinder would-be reformers for years to come. More than 15 years passed between Clinton’s failure to achieve health reform and Obama’s success—but his success may have contributed to a midterm election beating for his party in 2010. “If [the ACA] ends up not succeeding, you will have had two presidents who paid really steep prices for fighting for a transformation of the health system. It’s hard to see when the next president says, ‘Hey, I want to run that risk again for my administration,’ ” Aaron says.
Success, however, offers a sweet reward. “The nation’s health policy trajectory will be permanently altered, and that’s affecting something pushing 20 percent of the whole economy,” Aaron continues. “So it’s a big bet.”
There’s a lot we don’t know—and can’t know yet—about the Affordable Care Act. How many states will expand their Medicaid programs? How many of the cost-saving reforms will work and be implemented widely? We do know that the law will be life-altering for a handful of people and unremarkable, at least at first, for most others. But down the line, perhaps Obama’s reform plan could shift the entire system for everyone. It may even be the most radical change the health care system has ever seen.