The myriad of solutions to the ongoing healthcare crisis, and constant attempts to repeal and replace the barebones support already in place for low-income families, don’t just have an effect on individuals. Surprisingly, they also have a huge affect on businesses, startups, and groups of entrepreneurs. To understand the healthcare debate from all sides, and to explore the potential solutions to massive costs and sub-par care, we spoke with Judith Feder, Georgetown professor and former cabinet member for the Clinton administration on healthcare reform, and Karen Pollitz, senior fellow at the Kaiser Family Foundation and former healthcare expert in both the Clinton and Obama administrations.
ABERMAN: Why is health insurance so complicated, and so darn hard to fix?
FEDER: The American story, and like every country’s story, it’s a function of choices made early in its history that just stick. And when European and British countries were making decisions to have government national health insurance, we didn’t. In the early part of the 20th century, we barely had a federal government, no federal income taxes, not a big push. There was some interest, but it was squashed before World War 1, and even squashed in the Roosevelt administration, and health care did not become a part of the New Deal. In that period however, especially in the Great Depression, people needed health insurance, and providers, doctors and hospitals, needed to get paid. And what emerged was a private health insurance system, based on selling insurance to employers, to large groups.
And that system grew, and came to cover most Americans, most working age Americans, have employer sponsored health insurance. Now it’s important for everybody listening to know that there’s a lot of public policy in that system. The system grew in part because it was supported by a powerful tax break. The premiums that our employers pay are not treated as taxable income to employees, which is a very substantial tax break, skewed toward the better off, but of benefit to many middle income Americans. And with that support, which now, by the way, might surprise people, now amounts to about 300 billion dollars a year. So, huge, about half the cost of Medicare, that’s a good way to put it. Half the cost of Medicare, it’s huge.
And what it does is entrench that system. And when advocates for a public system try to expand government insurance, after the New Deal, they found that the most politically expedient approach was to build around that system, to say, well, OK, workers have that system, have employer sponsored insurance. It’s growing, let’s build something around it. We built Medicare and Medicaid, hugely beneficial, but left a significant number of people, before the Affordable Care Act, about 15 percent of Americans, moving on to 50 million people, without health insurance coverage. That population is excluded, but 85 percent of us have health insurance, 15 percent didn’t. And it’s very easy to scare the 85 percent into believing they’ll be worse off if we expand coverage, than if we don’t.
ABERMAN: So if I want to understand health care definitionally, it sounds to me that, first of all, I need to make sure that I appreciate that a tax subsidy is still government spending, and we’re comparing apples to apples, 300 billion is 300 billion, whether it’s tax revenue deferred or forgiven, or it’s money spent. That’s important. The second thing I hear you say is that, unlike other capitalist countries, like the United Kingdom for example, like Holland, like Japan, and many other places, the way that we decided to have ourselves regulate or manage health care was to let the private sector do it, under the umbrella of federal regulation. It was a distinct policy.
FEDER: And not much federal regulation. Very little federal regulation in that system, and no ability to control health care costs.
ABERMAN: Okay. So, we have this private system that grew up, Johnson, his Great Society said it’s unacceptable that we don’t take care of people who don’t have jobs anymore, or fail to have jobs. So we have this overlay. Karen, from from your perspective, looking at this from the Kaiser Family Foundation and so forth, how do policy makers deal with this? Is this really what’s going on right now, we have these entrenched interests, and it’s just hard to change the conversation?
POLLITZ: There’s definitely that. So, we have a huge big health care system, three and a half trillion dollars a year that we spend on healthcare, and that’s all somebody’s income. So, that’s a lot of entrenched interests right there. We do have a large system of private coverage, as Judy explained, although even though most of us have private coverage, it’s not like that’s one big plan. More than half of us get coverage through work, but there are actually millions of employer based plans, and insurance companies, we expect the insurance companies and private coverage should do a couple of things. You know, one is to pay the claims, two is to provide a network of doctors and hospitals where we can go, where they have negotiated a discount, or a deal on the undiscounted charges.
And that turns out not to be working very well. And we don’t have any requirements about that. So, we just sort of let the market work, we assume the market would work. But in fact, it hasn’t worked well at all, in private insurance. The market dynamics, the ability, because sometimes hospitals are consolidating in areas, and so they just have a whole lot more market power than any given health plan or insurance company. Now, in many areas, physician practices are consolidating, and there’s the same kind of distortion in the marketplace. And so, the marketplace can’t get to a very good discount, and certainly can’t get to any consistent prices. So, the cost of health care keeps going up, and we see employers continuing to provide coverage.
Now, we require the large employers to do that, but also the market kind of requires them to do that to get a good job. People are looking for good benefits. But this gets more and more and more expensive every year. And insurers are not helping employers by holding down the cost of health care. So, what we see employers doing instead is kind of shift the cost onto the employees, raise the deductibles. The average deductible in an employer plan has risen eight times the rate of wage growth over the past decade, and patients are starting to say, ouch. They can’t afford it when they go to the doctor, and whatever the bill is hits this big deductible, and then they can’t afford to pay it.
ABERMAN: It’s another way to ration health care. For those who say, well, the government’s going to ration health care, they effectively, the private sector, ration it by saying every time you go to the doctor, it’s going to cost you a larger percentage of money. You’ve touched on something that really is important: we have this private system. It’s tied to employment, but more and more jobs are gig economy jobs, or don’t provide those benefits. And that, I think, is where the hole in the market really gets kind of important, and I suspect that’s where we’re going to turn our conversation to when we talk about the Affordable Care Act. Karen, the Affordable Care Act: how does that fit into this private led model that prevails the United States?
POLLITZ: The Affordable Care Act tried to fill in the gaps. You can think of our eligibility for health insurance almost as a game of musical chairs, and when the music stops, if you’re not working for an employer that provides good health benefits, or in the family of someone who is in that situation, or if you don’t qualify for one of the public programs, Medicaid, for low income Medicare, then you have to buy health insurance on your own. And that rarely worked for people before the Affordable Care Act. The individual insurance market, number one, was unsubsidized. People had to pay the whole thing. Number two, it was unregulated. Number three, it was mostly medically underwritten.
So to apply for coverage, you had to answer a lot of questions about your health status, your health history, and you could be uninsurable, and denied coverage because of a pre-existing condition. So, the Affordable Care Act changed that. First, it took the Medicaid program, which was actually a safety net program only for some low income people, and it said this is for all low income people, including adults, up to 138 percent of poverty. The Supreme Court came along a few years later and said, well, that’s a state option. And then, in this little non group market, the Affordable Care Act said, OK, total do over. Now this is a market that has to offer major medical coverage, the same as what employers do.
It has to cover things like prescription drugs, and mental health, and maternity care, and hospitalization. It can never turn you down, or charge you more because you’re sick, or because you’re a woman, or any of these other factors. And it’s now going to be subsidized, so if you don’t qualify for an affordable job-based plan at work, and you don’t qualify for Medicaid, or Medicare, then you can come to the marketplace, and you can get your premiums reduced by tax credits, based on your income. At least, up to an income of about $50,000 a year, for a single person, four times the poverty level.
ABERMAN: Well I will say, just speaking from the standpoint of an entrepreneur, and owning my own businesses, and growing businesses. Getting healthcare coverage, if you’re an entrepreneur was just about impossible before the Affordable Care Act. So although there’s a tendency to focus on access to healthcare for people that can’t afford it, I think it’s really important to get out the point that there are a lot of people that could afford insurance, but still couldn’t get it at any reasonable price, because they weren’t in a profession that had an employer.
And most businesses that create jobs are small businesses that are started by entrepreneurs. What do they do for health care? Which leads me to my next point which is: it strikes me that right now, this whole conversation about healthcare, because we’re going to start talking about alternatives, is around oh, it’s a binary choice: it’s either free market capitalist or socialist. You hear that a lot. So, here’s a lightning round question, Judy: which of these capitalist countries doesn’t have government-involved health care? Japan, UK, France, Canada, any of them?
FEDER: They’ve all got it.
ABERMAN: Is there any country in the world that has an advanced capitalist economy that does not have government provided health care in some way?
ABERMAN: Okay so, how do we begin to have a conversation about whether or not it’s actually capitalist or not capitalist to have healthcare, and actually start to talk about whether or not we want to provide healthcare to people?
FEDER: That’s a good point, Jonathan, it’s about goddamn time.
ABERMAN: So, there are proposals that are floating around right now on both sides of the aisle. And let’s start to unpack them, so our listeners can understand them. I guess it’s easy to start with the Republican side of things. What are they ultimately saying to the market right now?
FEDER: Well you know, prior to the 2018 elections, we had a Congress and a president who were all about repealing the Affordable Care Act. And then when they got nervous, because with the Affordable Care Act we’d managed to insure newly about 20 million people who were at risk of losing it, they talked about repeal and replace, and they couldn’t carry it off. They got close because of their ideology, and sticking together, but they couldn’t carry it off. And their policies, there’s a lot of claim, especially from the president, about how he’s gonna give us something bigger and better, and it’s challenging for Republicans to do that because, despite the rhetoric about the Affordable Care Act, it’s really a pretty modest law.
It’s filling gaps in the existing system, and with incentives to buy, to a significant extent, private insurance. Obamacare really was Romneycare. It is essentially a Republican bill. So, they’ve been there, and their general strategy though, they claim the contrary, they like to talk about how they want to protect people who have pre-existing conditions, which is most of us. Their policies belie that goal. And it’s really dishonest, and what they advocate is more choice, less regulation, which leads to people who need insurance not being able to get it.
ABERMAN: So effectively, when you cut through it all. What they’re saying is, it’s sort of ultra capitalist, ultra libertarian, from the standpoint of, if you can afford health care in the private market, you get it, and you get the health care that people offer you. And people who have means will choose the best policies. And for those that don’t have access, or don’t have the means, you’re living in a capitalist country
FEDER: And as you said earlier, given given the cost of health care, it’s way up the income scale that people can’t afford it, if they are denied coverage, or charged more, because of preexisting conditions.
ABERMAN: So Karen, I know you spent a lot of time on this from a policy standpoint, if that’s the ultra capitalist, or the hard edged side of things, what are some of these proposals that are coming out now on the Democratic side, and in the primary? I hear single payer, I hear Medicaid buy in, there a lot of different things. We’re not going to cover all this in this segment, we’re gonna have to move through to the next one, but let’s just let’s see: what are some of these different alternatives, and then let’s unpack them in the last segment.
POLLITZ: So in three main buckets, there are proposals to just replace all the different kinds of health care that we have with one federal comprehensive program, that would be called Medicare for All, universal Medicare. There are proposals to make public plan options available to some or all of us, instead of whatever other coverage we might have available to us today. And then, there’s one proposal to not introduce any new public plans, but to just sort of look at some of the shortcomings of the Affordable Care Act, enhance the subsidies so that more people can qualify for them, undo some of the regulatory changes that the Trump administration has engaged in for past two years that have had the effect of distorting and increasing marketplace premiums, and making other kinds of improvements.
But essentially, to get more people covered, whatever mechanism, there needs to be greater eligibility for coverage. For example, immigrants aren’t eligible for anything, poor people in states that have an expanded Medicaid aren’t eligible for anything. And expanding subsidies. The 27 million remaining uninsured still mostly have pretty modest incomes, and whatever coverage we make available to them, they’re gonna need some help paying for it. They just don’t earn enough to pay on their own.
ABERMAN: It’s all very interesting to me, and I find myself thinking about two different things, which we’ll turn to: is this an ethical conversation, or is this an economics conversation?
ABERMAN: Well, that was easy. Okay. Well, we’re going to talk about it for the next 10 minutes. Really, it’s both?
FEDER: Yeah. The ethical issue is whether we believe, as a society, that everybody should have access to health care, to good health care, when they need it, and that without insurance that is simply not possible. So the fact that we have close to 30 million people without health insurance, and many others, as Karen described, millions of others under insured, with the big out-of-pocket payments in their health insurance, that limits their access to health care. And Americans like to think that everybody gets health care when they need it in this country, but the evidence tells us it’s simply not true.
In fact, the evidence says without insurance you get care later, you get less care, and for the same conditions you’re more likely to die than people who have health insurance. So, it is clearly an ethical issue. On the economic side, because we have such a fragmented health insurance system, and a limited government role, and much of our health insurance system, our health care costs are, per capita, at least double what the costs are per capita in other industrialized nations. And that cost is borne by all of us, and is depriving us of the capacity to do other things with those resources. So, it’s most definitely an economic as well as an ethical issue.
ABEMRAN: It also strikes me, Judy, that another hidden aspect of this is, it forces people to stay in jobs that they don’t necessarily like.
FEDER: Yeah, less now because of the Affordable Care Act, but it’s still true.
ABERMAN: Now that we’ve got a situation where we clearly are going to have a health care conversation and debate in this upcoming presidential cycle, it’s very clear that it’s it’s going to line up that way. I hear a lot on the Democratic side. Can we talk a little bit, Karen and Judy, about some of the key proposals, and how folks can understand them when they read about in the newspaper over the next 18 months?
POLLITZ: The Medicare for All proposals say the federal government will just take care of all of this, we’ll enlarge the Medicare program, make it more comprehensive. No more premiums, no more co-pays, no more deductibles, we’ll pay for it with taxes, but that’s it. Right. So, the whole three and a half trillion dollar system goes into this new federal program. The federal government now pays about 28 cents on the national health care dollar. So, the other 72 cents are paid by employers and states and families, and they would get a big break on that, although presumably, some of that would then get tax back to pay for this new program. So that’s kind of option one.
The Medicare for All program would also have a national system for paying doctors and hospitals, so one fee schedule, no more having 10,000 prices for a chest x-ray. We would just know what things cost, doctors and hospitals would know what they would get paid. Possibly more than what Medicare pays now, likely less than what private insurance pays now. Then, there are the public plan option. So, we’ll create this public plan, and some people can have it or not, if you like what you have you can keep it. And there’s a bunch of those. Some are very narrow proposals, only for some people in the marketplace where there aren’t too many plan choices.
Others, including two that will be introduced today, are very broad. Senator Merkley’s bill, for example, would create this new Medicare Part E. There’s always another road down the alphabet for Medicare, and lots of people could sign up for that. And employers, if they wanted to, could, instead of buying from Blue Cross or Cigna, could buy an insurance policy from Medicare.
Or, they could keep their self-funded plan, and they could essentially rent Medicare’s network and Medicare’s prices. So, employers could get the advantage of the kind of lower, more consistent prices that the public plan offers, and continue to fund their program. At the other end, there’s a proposal to just kind of try to shore up the marketplace, and expand the subsidies, and do things. But there’s no kind of inherent cost containment in that, because it would still be privately insured, for the most part, and we would still have private insurers paying whatever they pay for any kind of health care.
ABERMAN: So in effect, the proposals on the Democratic side of things range from taking the the public private model we have now, some of the Affordable Care Act, shoring up the exchanges, to creating more of a federal health care plan that people can opt into, that’s more of a scaled up system, so there’s a true public alternative. Almost like a country like Britain, where you have public insurance, and you have these private plans, maybe. And then the other possibility is a full bore national health service.
FEDER: Nobody’s gone to a National Health Service.
FEDER: The National Health Service is what the UK has.
ABERMAN: That’s not what the single payer proposal is?
FEDER: No. The single payer proposal is a single insurer, but the docs and the hospitals remain private agents. So, that’s different from what is really a socialist system, in which the government owns it.
ABERMAN: So that effectively becomes like Medicare, except for everybody.
FEDER: Yeah. That’s single payer, it’s like Medicare except for everybody. But an important point to note, as we’ve discussed this: an awful lot of this conversation is value driven, as you raised earlier, and it tends to skip over, although some of the legislation addresses it, that Medicare, although it’s extremely valuable to our older population and the people with disabilities who qualify, that Medicare itself has holes. Its coverage is not as generous as the Affordable Care Act is, in terms of the scope of benefits. And Medicare also requires significant cost sharing. People buy supplemental insurance to cover Medicare. So, part of improving the system, and we use Medicare as a label because it’s a hugely popular government program, we need to remember that it needs some fixes too
ABERMAN: As we look forward. Is it possible for our country to have a conversation about health care that’s not going to get mired in ideologically driven talking points? You know, how can we get past, it’s a socialist proposal, it’s not compassionate? How do we get people to actually have these kinds of conversations?
POLLITZ: The history is that, every time this has come up in a national debate, that kind of rhetoric has become a key part of the debate. There was just a hearing in the House of Representatives, sort of the first one, and I gather there will be more, that actually I thought was pretty civil, and pretty enlightened. And a lot of kind of good give and take. So, I think socialized medicine got mentioned once or twice, but there were a lot of questions about, well, who would get care, and how much would this cost, and how much would taxes go up, and what would be the offsetting benefits?
There was an amazingly compelling patient who was testifying, who talked about what it means for him. And when we talk about how much do we pay, he said, this is what I have to pay. And this is what it’s costing my children, and my family, you know, to spend so much on my health care that isn’t covered. So, I thought there was actually a really encouraging discussion about it. No idea where it will end up, but an intelligent discussion.
ABERMAN: Judy, you teach policy in a nonpartisan way. How do you get people think about this policy in a nonpartisan way?
FEDER: Well I do get them to think about the policy, and after many years of working with Karen, I pay a lot of attention to pooling risk. And that’s what insurance is about, getting a lot of people, most of us are healthy most of the time, getting us to come together and contribute when we’re healthy to cover ourselves when we’re sick, and to be very leery of proposals that claim to promote choice, but in fact when they promote choice, they undermine the risk pool, and segment to separate the healthy from the sick.
But I also, Jonathan, teach the politics of policy, and that even if these are the facts and the evidence about underlying policy, I would argue that health insurance, particularly with the Affordable Care Act, and the challenge, the struggle it’s been to not only to enact it, but to implement and hold onto it, that it has become the symbol. Health insurance has become symbolic of the debate about the role of government in this country, and the level of taxes. I think it was an achievement to have a hearing that actually was a quest for information, and an effort on the part of members of Congress to educate themselves about choices. I have no doubt that the rhetoric is going to be flying to demonize proposals that are simply aimed at getting Americans what they need.
ABERMAN: Well, if nothing else, I hope that this twenty five minutes that we’ve spent together today on the show will help our listeners have a better understanding of what the true issues are. I’ve really learned a lot from having you both in the studio. Judy Feder, thanks very much for joining us today. And Karen Pollitz, thank you for joining us as well. This was a What’s Working in Washington EXTRA, we’ll see you next time
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