35: Why Are We Still Fighting About Obamacare?

It is Thursday April. I'm Tori Stiwell and economics reporter with Bloomberg News in d C. And I am joined by my co host Dan moss Are, Executive Economics editor in New York. Cadien. Hi, Tory, Great to be here. Yeah. Well, I'm not sure if everyone has seen the headline s lately, but the Patient Protection and Affordable Care Act a k

Obamacare is back in the news. United Health Group, which is a health insurer, last week announced that it will drop out of the government organized health insurance markets in at least twenty three states because it's losing too much money on those policies. And United Health had about almost eight hundred thousand a c A customers as of March one, so there are a decent number of people who will have to shop for new plans or be left for

with fewer options for coverage. And Obamacare has also remained a hot issue during this election cycle. A Kaiser Family Foundation pole last month showed seventy eight of registered voters say health care is very or extremely important to them when it comes to deciding who they'll vote for. And that was second only to you guessed at the economy

and jobs. With the law staying squarely in the spotlight some six years after its passage, we thought this was a great opportunity to break down exactly what it is, what it's supposed to do, and how that's been work hang out and because so much of the debate centers on economic issues, the impact on businesses, on employment, on healthcare, inflation, Benchmark is the perfect forum for a discussion that's right.

And I can't speak for everyone else, but I do feel like every time I hear a discussion about the Affordable Care Act, it's usually very one sided. Um and so we have a solution for that here on Benchmark. We have two guests here with me in the DC studio to help us make sense of it all. First off, we have the former US Health Secretary, Kathleen Sibelius. She

helped President Barack Obama. Shephard the law through Congress back in and she oversaw the writing of tens of thousands of pages of regulations and traveled regularly to persuade Americans to sign up for coverage through the new online market places. After resigning two years ago, she now runs her own consulting firm, Sibelius Resources. I have to applaud you for not calling it Sibelious Group. It really seemed there like

every former official was adding group after their name. We also have Jim Capretta, who spent more than two decades studying American healthcare policy, and lately he's specifically been looking at market based alternatives to Affordable Care Act. He's a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute. Now, Jim, I hope you won't mind me placing the American Enterprise Institute on the spectrum of think tanks that are clustered

around d C. How would you characterize that think tank? Well, I think it's fair fair to say that mostly it's an independent organization. People can take their own point of view, but most of the people there tend to be on the on the conservative side of the spectrum or to some degree. Good to have you both here, Thank you,

Good to be with you. Dan and I are going to start out with a brief overview of a c just to give all of our listeners sort of a foundation to work off of for the rest of the show. So it had the sweeping goals of both giving more people health insurance and reshaping a medical system that spends more and delivers less than any other wealthy country. It was signed into law on March and took full effect in October, and it has a few key features that

you've probably heard about at some point or another. First off, the law requires most US citizens and legal residents to have health insurance, so if your employer doesn't offer it, you need to go out and find it on your own, or else you have to pay a fine. So when you hear individual mandate, that's what we're talking about. And the goal behind that was to make sure we had enough healthy customers signing up to balance out the cost

of sicker ones. And if you meet certain income limits, the government also provides subsidies to help you pay for that insurance. The law also created state based health insurance exchanges, these websites that are sort of like a Kayak dot com, but for comparing health insurance packages from different providers. States can run their own exchanges, but in many cases they've

deferred to the federal government to do so. Thirdly, employers who don't provide health coverage and have the equivalent of fifty or more full time employees will be fined. Those who do offer coverage have to pass an affordability test, and employers with more than two employees have to automatically enroll their employees into plants, with an option for employees to opt out. The law also introduced separate exchanges for

small businesses to purchase coverage for their employees. And lastly, the law expanded the number of people eligible for many kite, though not all states have chosen to do so. And I know that we've just thrown a ton of information at everyone, but hopefully our guests here can help us digest it all and come up with some answers about

what's been working and what hasn't. So to start, I thought it'd be good for our listeners to get a sense of where each of you stand on the issue, so succinctly if you could, if you had to label the law grantly, I guess a success or a failure, which would it be? And why do you want to start a self CAVI? Well, sure, I think overall it's done pretty well. There are some fragile parts of the

law that are still evolving. But um, we have the lowest number of uninsured people that we've ever had in this country, so access to insurance for a part of the population who didn't have affordable insurance is definitely working. About twenty million new lives are enrolled in either Medicaid

expanded programs or in the marketplaces. Health costs in spite of all of the I would say noise and conflicting reports out there, overall health inflation for expenditures across the board, government health inflation for the two big programs Medicare and Medicaid and what individuals are spending is rising at the slowest level in fifty years. And that continues to happen, so that while um, no one can say costs have gone down, they have been rising at a much slower pace.

And I think for the first time ever. Health providers tell me there is a real um revolution underway in terms of how health care is being delivered by providers because the government has chosen to use its enormous pay lever about a trillion dollars a year to move as quickly as possible from fee for service payments, which meant the more stuff you do, the more dollars you get paid into a more quality based, outcome based payment system,

better care, lower costs, more improvements along the way, and that is beginning to show some very promising results. Jim, what do you think, Well, I would say that the law in general has and you'll be surprised, this succeeded in the ways that we're fairly easy to succeed at and but is not doing well and all the things that, of course are harder and more difficult to to do. Um. The law basically expanded medicaid to many millions of more people.

That didn't take too much. The eligibility processes are already in place all around the country. Uh, it's difficult politically, as you can see, there's a lot of resistance to it. But essentially what they did is they changed the income levels to a higher level and started signing up a lot more people in advertising and through the outreach system that we're already in place, brought them more into the

Medicaid program. So of the people, the Congressional Budget Office says that in the law likely reduced the people who are uninsured or otherwise would have been uninsured by about seventeen million people on a base of probably around fifty million or so. That is not a small matter. So let's all stipulate that they the law has done a

that part of it um. But I would say if you look at the exchanges, which are also supposed to be a big part of covering and insured and changing how insurance is delivered and establishing a news insurance system, I think they're it's largely it's limping along, but it's got a lot of problems. First of all, the number of uninsured that have gone into the exchanges is probably quite low. You don't have an exact estimate, but it's

probably in the low single digit millions. So most of the people that ended up in the exchanges were either insured and maybe not so great insurance before, or we're in the individual market that essentially got closed down by U. The a c A, and they were forced into this market. Uh. People who can voluntarily decide to move into the exchanges or not, especially if they're paying their own premiums, are

deciding and huge numbers not to do it. They don't find the products attractive, the premiums are too high, the deductibles are far too high. Settling for a fine, they end up paying the fine, or they stay uninsured, or they try to find a way into the employer marketplace if they can. If some of this was so easy, relatively easy, as you mentioned at the stop, why wasn't it done sooner? Oh? For the political circumstances weren't right. I mean, I didn't say that it was easy politically.

I meant it was easy administratively, in the sense that we did many Medicaid expansions over the last forty years. This was a large one, but another one in a long line of Medicaid expansions that brought more people into the program. Frankly, we did a huge expansion and Medicaid like coverage for children in the nine nineties of almost comparable size, and so this wasn't unprecedented in terms of

bringing more people into a publicly subsidized insurance system. It was sort of a well known path to how to do that. The difficult part is trying not to have as many people on publicly subdidized insurance, having a stable insurance market that is outside of publicly running rance it is more like a private system there. I think the law is having a lot of difficulty. Frankly, well, Jim, you mentioned the Congressional Budget Office, and we're going to

get back to that in a sak. Let's just take a step back and consider one of the primary goals of the Affordable Care Act, which is to make healthcare insurance accessible to more people. Now, as of the end of the third open enrollment period under the a c A, twelve point seven million had signed up for coverage in those marketplaces, up from eleven point seven million last year

and eight million in twenty fourteen. Now, while that's in line with the target the Health Department announced the head of this year's open enrollment, it's short of the twenty one million the CBO projected for back in March of last year, and as I think you mentioned, CBO recently lowered its forecast, and which, as Kathleen mentioned, is the first full year of Obama's coverage expansion, the percentage of people without health insurance was ten point four percent, or

thirty three million people, according to the Census Bureau. And that's down from forty one eight million people. So it looks like the law has achieved that goal of providing more people with health insurance. But at what sort of cost? How has this affected households, and how has this affected the US budget? Do you want to start well, I think again, what we're talking about is a slice of the overall insurance market. The President really had a couple

of choices and Congress had choices going into this. Do you start all over, wipe the slate clean and do as some people suggested? And one of our Democratic candidates is still suggesting kind of a medicare for all, everybody's in a single payer public plan. That was Sanders, That's Bernie Sanders. But that was a lively debate in Oh No Mine when this whole law was being looked at.

Or do you and this is the path that the President and the majority of Congress chose at the time, do you try and fill the gap, so leave in place the employer plans worth here there and ninety of larger employers offer health insurance continue to offer health insurance. UH. Veterans have their own insurance plans, those over sixty five

have a separate insurance plans, those low income Americans. So there was a portion of the market, the individual market and some small groups that was really on their own. Everybody was medically underwritten, so your own health issues were taken into account. You could be totally locked out by an insurance company, you could be locked out for the conditions which caused you to be sick in the first place, and you could be priced pretty much anywhere over the boards.

That's the portion of the market that the Affordable Care Act addressed. And UM there has always been a lot of churn in the market, people in and out. If they get a job at Ford Motor Company, they dropped their own insurance and joined the Ford plan. If they leave that job because they retire early, they're back on their own. And also some people just signing up for plans and then canceling it. You bet, um, and that's always happened in the individual market. People moved in and

out about six months at a time. So some of what we're seeing in the new marketplaces is very familiar, lots of churn, lots of folks coming in and out, incomes change, job circumstances change, um. Not surprisingly, people who were older and sicker, we're desperate for some coverage, particularly comprehensive coverage where their medical conditions would not be blocking them from getting insurance. They were the first ones in the door, they were the first ones in the gate.

They are older and sicker than a lot of people who have not chosen yet to come into that market. So I think some of what we're seeing is was predictable. This is a more expensive popular and when you put everybody in the same pool, which is what insurance is supposed to be balancing risk, you get sick and I don't one year, and then I get sick the next year and you don't. That's that's a risk pool. You don't need everybody to get sick at once um or

you can't afford it. So some of what we're seeing I think was able to be predicted at the outset and able to be looked at. There is more competition in this market than there has ever been before. Uh, there are more choices that consumers have than they've ever had before. But it's still a brand new kind of fledgling risk pool that needs to be developed, and we need more younger and healthier people to join that market. Yeah, and Jim, before we go to break, what do you

think is the scope for that? Do you think younger and healthier people will actually join the market, what its future enrollment prospects look like? Well, I mean, I think

I think it's going to be tough. Frankly, I think the the view of the plans that are being offered on the exchanges is starting to harden because look, I mean, anybody who's blow about two hundred or two the federal poverty line and income which for a single person is you know, twenty five thousand dollars a year up to about thirty dollars a year, they're going to get a very large subsidy from the federal government that makes the

premium relatively attractive inside the exchanges. For anyone who has to pay the premium themselves slightly higher incomes where it's phased down, the products are looking quite unattractive to them. You can look in pulling data and see it. And actually, if you just go on on and look at some of the offerings you'll see, yeah, actually did it this week. You know, a bronze plan or silver plan with a with a you know, very large deductible for a single person and still a premium of six or seven or

eight hundred dollars a month. You know, people are gonna start to say, I can't afford that, right because I'm gonna pay a lot of premium before and a deductible before I see any coverage. So I think the the attractiveness of the policies is really dependent on the amount of federal subsidy a person is getting. And that's the difficulty. It's really bifurcated the market for people with incomes in the eligibility cut, where they big subsidy, they are finding

the products relatively attractive. Above that not not so much. The only thing I would say before we go to break, just so people have what Jim said close at hand. I think there is a some misguided view that somehow this subsidy is an unusual thing. And virtually every employer plan offered, the individual employee has a major share of that plan paid by his or her employer. And that's

the mindset that really this plan was constructed under. Since these folks are often mom and pop operators working on their own. Entrepreneurs have two or three jobs, they don't have an employer paying a share. So the subsidy really is the sub institute for an employer plan. I'm gonna share most people in any insurance plan could pay a hundred percent out of their own paycheck, out of their own pocket, and I think that some people have looked

at the subsidy as something unusual. It actually mirrors what happens each and every day in workplace plans, where the employer picks up a major share of the tab, and then the employee kicks in for him or herself for their dependence and moves on. Well, we're going to take a quick break for a word from our sponsor, but when we come back, we will continue our discussion on what's working and what's not with the Affordable Care Act and what this year's election may mean for the law

after this break. This episode of Bloomberg Benchmark is sponsored by HSBC, with over eight thousand global relationship managers on the ground in over sixty countries. HSBC makes your global ambition their local business. HSBC. Let's turn to healthcare costs. Healthcare inflation as measured by the personal consumption expenditures that's a gauge of the Federal Reserve looks at closely, has

trailed overall core inflation for three consecutive years now. Economists say at least part of that slowdown may be attributed to Obamacare, which encourages shorter hospital stays and limits on unnecessary procedures. But from what we gather, healthcare costs are broadly expected to start re accelerating. Jim Wiser, Well, first

of all, they did re accelerate. So if you look at the national Health Expenditure accounts, the accounts that are looked at and run by the government, they announced the last year that those costs went up nationwide by five point three the highest level and I think seven years Uh. The expectation from those same p people is that the

increase will be similar in and sixteen and beyond. I think this notion that the Affordable Care Act is related to the broad slowdown in health spending, this is one area where I think I will disagree with the secretaries that this I don't I don't believe that's the case. If you go back to two thousand and two, healthcare inflation in the United States was about nine point six percent. It fell to four point eight by two thousand and eight.

So if there was something associated with the A C A that brought and then trend continued then into two thousand nine, ten and eleven, you'd be hard pressed to say people were in anticipating. You know, back in three and four and five, you know that the A C A was going to be enacted and therefore, you know, resulted in this broad slowdown. Moreover, there's been a global slowdown in health spending across the entire industrialized world of

comparable amounts that has occurred in the United States. Now, I know, we think the A C A did a lot of eight things, but it probably didn't slow down health spending global. And yet this period does coincide with you mentioned two thousand a night a rather apocalyptic economic environment followed by a recovery certainly within the G seven

that's been okay but not super awesome. Now, could that not be driving this rather than anything to do with the A C A. If you don't mind, I'll just say one more word about this, and I of course that's the case. The government actuaries that look at this for the government, for the executive branch, have reached that

exact conclusion. They run a regression analysis several times going back decades, and the slowdown that has occurred in recent years is very predictable based on the economic conditions that occurred in the United States at that time. So look, I'm not trying to dismiss entirely everything that is in the a c A. Some of those provisions are having I think a marginal effect, but by and large, the notable care organization phenomenon, the bundled payments, the readmission policy.

If you look at the estimates that were done both at the time they were enacted and since they are minor events in a trillions and trillions of dollar health system, and let me just push a little let me just push you a little bit, there could have not also reflect except can I get in this conversation before you move in a different direction, because I think I think it's important to have a baseline of what we're talking about. I don't think there's any question nor any dispute that

the economic downturn had a significant impact on health expenditures. Overall, everyone agrees to that. What I think there is some dispute about and now I have seen gather differing reports than Jim is reading. A lot of economists are beginning to also say, now in twenty sixteen, eight years after the economic downturn, that there's a continued slow down in health costs. The five percent increases above what was seen in prior years, but it's significantly below what the trend

line was before the turndown. So we're still in a period of compressed growth. And in spite of the fact that Medicare has more people coming into the program each and every day than they've ever seen larger enrollments, Medicaid as larger enrollments, their overall health inflation costs are at

about one point three percent. So we're still seeing a change in costs, not necessarily due to, as Jim said, some of the new ways of paying providers organizing providers, but I think there's a very significant change underway within the health system, understanding that the payment system is going to look very different in the future, and that money is actually coming out of the system for the first time. I want to hit two more points before and out

of time. One of those is one that's very near and dear to my heart as an economics reporter, and that is the A c AS effect on employment, and um, you know, economists themselves are still debating what the effect is there. And you know, some have said that it would encourage employers to shift more people into part time work to avoid providing that health insurance and the regulatory headache that would come with trying to figure out how

to do that. Um, and others have said, you know, it sort of liberates employees to a certain extent, allows them to strike it on their own, et cetera. Why is the impact on employment so murky and how do you eventually think that will shake out? Well, I think the the gold standard for looking at this is probably the Congressional Budget Office, And there's a lot of forces

going in both directions. I'll grant you that in the A c A there's some provisions and economists might say might improve employment, But the biggest effects, according to CBO, go in the opposite direction toward the hampening labor force participation. And what they estimated is that by twenty nineteen or so, two and a half million people at full time equivalent of hours worked will drop out of the labor force due to the incentives of the A, C, A and

the mechanism. The reason is that the subsidy structure is provided for people so that they can First of all, a lot of people can now get health insurance without working. So it used to be that if you were not on Medicaid, the most straightforward way to get health insurance was actually to actually go into the labor force, try to get an employer that had insurance and get coverage that way. Now that's not the greatest way to do

things in the world, but that's that's the reality. So when you provided a lot of insurance options for people outside of the employement sector, some people do drop out of the labor market. The second big effect is you phase out the subsidies by income, so as you earn more money, you get a smaller subsidy by the federal government. That's according to CBO, it's like a sent essentially like an implicit tax on earned income on top of the

payroll tax, on top of the income tax. And it's quite substantial, and so some people in the two D the poverty range will actually work less than the otherwise. With well, let's just keep with the job market for just one second. In Kathleen, you may want to jump in here, you know, Jim, this is an uneven economic recovery, to be sure, but one bright spot is the labor market.

It's going gangbusters. Unemployment rate in the United States is approaching five jobless claims are the lowest in a couple of generations. I mean, if this was such a dire thing for the labor market, wouldn't it be showing up? Well. I think, you know, as someone who's looked at this carefully, that the people that have exited the labor force is still in these several millions compared to what it was prior to the downturns. So much of that is due

to retirements, right that. Some of it is early retirements, but some of it is people who just decided at that they would rather you know, they find the prospects not very good, and so they're not entering the job markets. I mean, it's it's hard to argue that the labor market is great when the number of people United States, the population has grown, and the number of people in the United States working today is still not fully caught up to the trend line that would have been had

we not had the recession. Well, I find this discussion, frankly sort of baffling, given the predictions which were dire when this law was passed. The prediction was that this a c A Obamacare bill would be a job killer. We have had fourteen million new jobs over the last seventy three months, the longest continued growth of jobs in the country. So I think at a macro level, it's very hard to argue that we've had a job killer bill the CBO data. I also take a slightly different lens.

It's no question that there may be some people impacted by subsidies. There also are lots of people who no longer have to stay in a job beyond what they would like to do until they get to Medicare eligibility age, because now if you retire early, you have an option for health insurance that you didn't have before. And actually the single largest uninsured population prior to the passage of this bill where people fifty five to sixty five. So there was some job lock based on I have to

stay for insurance. My wife has to take an off farm job to get insurance for the family farm. We have to make certain kinds of job choices, which now hopefully people are able to start their own business, to look at a second career, do other things. So there is some way of looking at also this job flexibility, which is not necessarily a bad idea, but maybe very positive idea. And finally, the largest growth sector, one of the largest growth sectors in this new jobs economy is

in the health care area. Lots of people coming into the health career for service delivery, for tech involvement I T has exploded, startups have exploded, so it's been in its own economic boost I would say over the last five years. Well, I think we need to wrap up here shortly, but I think this is an important part and I do want to act get to this part of the interview. So I want to turn to the

future of the law. Congressional Republicans have led effort after effort to repeal the law, and we know that it does remain fairly a little unpopular with voters have an unfavorable view of the A c A compared with who have a favorable favorable view, and that's fairly well split along party lines. Um Ted it has promised to repeal it. Donald Trump has also promised to repeal it and replace

it with quote something so much better. Um And on the other hand, heavily Clinton wants to keep Obamacare but fix its shortcomings. Jim, why the focus do you think from Republican lawmakers on repealing instead of making what we have better? Uh? Well, first of all, I need to say that I don't think the just for the for your listeners, I don't think the stances of the two

leading Republican candidates is very uh satisfactory. I think if they're going to talk about healthcare, I think they're going to whoever becomes the nominee will need to provide to the public a much clearer view of what vision they have for healthcare in the United States that would actually work as practical and could pass in the Congress. So there's going to be an obligation, and I think both of the leading candidates for the time being have fallen

way short of that. So having said that, I think in con risk the the main view is that, you know, there is a basic philosophical problem here that needs to be addressed and settled and maybe eventually will be perhaps in favor of the law that's already on the books, which is that how much authority over the health system do you want to have residing with the federal government. I mean, I think that's fundamentally the issue. And of course, in the short term, you know, it doesn't make that

much difference. It's really over a ten or fifteen or twenty year period where the federal government can exert a lot more authority and power over the health system, as we were just talking about it, with delivery system reformed through Medicare, changing how physicians are are paid, changing the quality metrics for physicians, changing how when rates insurance plans.

The federal government has a huge amount of authority now under this law, and I think the basic concern amongst opponents in the Congress, I mean, people who actually understand how it works, is that they think it's too much that over time that's going to erode its quality, you know, force a lot of people into publicly and publicly subsidized products and publicly regulated products, it will be of lower value.

Do you think, Kathleen, that it's realistic that this whole thing gets rolled back if we if we do get a Republican president in sixteen, and if not, why do you think Republicans keep focusing on it? Well, there certainly has been a constant drumbeat since the day the President signed this law that it should be repealed and replaced. I think that second term, I would absolutely agree with Jim.

Six years after the law was signed, I still have no idea what that means, and I'm not sure that there have been many viable suggestions put forth about what that means, except let's run just a national high risk pool and everybody who's sick can be in a risk pool and go back to the old days where insurers could basically they can choose who they wanted to cover

in in this individual market. Again, if you work for four Motor Company and you sign up for their health plan, they don't go through your own personal health history, they don't limit your ability to participate your an employee you're in. So the individual market is really what we're talking about. Should people be able to buy insurance, should they be pulled together? I think there are lots of areas of

this law that could have some significant improvement. I hope we get to a discussion in the next Congress where maybe that's an effort. How do we move forward, What kinds of alternatives are there to ensuring more people, bringing down costs, making delivery system reform really work and accelerate the progress has been made. How can we work together

to do it as opposed to relitigating the past. So we'll see what happens, but I would agree with you, I'm eager to see what the candidates mean by replace and what proposition they are willing to put forward to the public. Well, thanks so much to both of you for joining us. I know I learned a lot today and I hope our listeners did too. And Benchmark will be back next week. Until then, you can find us on the Bloomberg terminal and Bloomberg dot com, as well

as on iTunes, Pocketcast, and Stitcher. And while you're there, please take a minute to rate and review the show so more listeners can find us and do let us know what you thought of the show. You can talk to and follow us on Twitter at Daniel most d C and at Tory Stillwell. We'll see you next week. This episode of Bloomberg Benchmark was sponsored by HSBC. With HSBC, you have up to the minute visibility and control of your global cash positions so your business can move at

the speed of opportunity. HSBC