Rebuilding Health Care Policy from the Ground Up

Frank Pasquale

The signature progressive initiative of early 21st century America--the Affordable Care Act--is about to be gutted.  In 2009, I agonized about whether to support it. In the last paragraph of a bloated blog post, I concluded:

By passing this reform bill, Democrats will jettison whatever “populist” credentials they once had, opting instead for an early-twentieth-century “progressive” vision of technocratic alliance between corporate and government experts. . . . We’ll commence an endless argument (read: notice and comment rulemaking and subsequent administrative adjudications) over what constitutes an adequate baseline of coverage. . . . But the fundamental victory of reform–the national commitment that no one should have to choose between death or bankruptcy when confronted with a serious illness–will also endure. The tragic paradox is that the Democrats can only achieve this great cultural and ideological victory by becoming identified with the very interests that only they are willing to confront.

I was right about a few things: it was a Pyrrhic victory, the backlash was brutal, and virtually every indignity or imposition concocted by private insurers in the past seven years has been blamed on "Obamacare." But I was wrong about the most important points. The rulemaking and adjudications will end. The Trump/Ryan/McConnell approach to health care will leave Obamacare in the dustbin of history. And when it does, it will impose on millions of Americans exactly the situation they faced pre-ACA: choose between death or bankruptcy when confronted with a serious illness.

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In October, Larissa MacFarquhar published a thoughtful essay on "The Heart of Trump Country." One supporter of the President-elect said:  “When you hear about illegal aliens getting benefits and you have people here starving to death and can’t get nothing, it’s just a slap in the face. When you start talking about bringing in refugees and when they get here they get medical and dental and they get set up with some funds—what do we get?" Here's Obamacare's answer:

Under the terms of the ACA, if you are unemployed, or if your employer's insurance is unaffordable (defined as an individual plan (not a family plan) costing you over 9.5% of income), you can buy insurance on the exchange. You can choose plans from one of four precious metal tiers (bronze, silver, gold, and platinum), with varying actuarial values (60 to 90%). You'll pay premiums, but you'll also get sliding scale subsidies based on how high your income is above the poverty level. You will probably also need to pay co-pays, coinsurance (a percentage of each bill), and deductibles, up to some percentage of your income specified by statutory out-of-pocket maximums. (Just be sure not to incur out-out-network costs that don't count toward out-of-pocket maximums.)

But you can get cost-sharing subsidies to cover some of that expense, based on a sliding scale slightly different than the premium assistance tax credit scale. Just be sure to shop carefully on the exchange, because some plans have narrow networks--that is, they may not cover the physicians or hospitals you normally use. In fact, you may have to drive 20 or 50 miles to find a physician in the network--the rules on network adequacy can be hazy. Note also that, in a narrow network, if you have a surgery, it's possible out-of-network physicians or other personnel may attend, and you could be on the hook for the whole amount they charge--unless your state has a "no surprise billing" law.

Neoliberal market designers love the kaleidoscopic complexity of Obamacare. It is a mandala of marketization, an intricately reticulated tapestry of calibrated incentives and penalties. It combined the ideas of the best and the brightest health policy elites, both liberal and conservative. (As Obama proudly reminded conservatives, the ACA "pretty much was their plan before I adopted it — based on conservative, market-based principles developed by the Heritage Foundation.") Insurers have to offer coverage, and individuals are mandated to buy insurance. What if employers free-load off the exchanges? There's an employer mandate. What if some insurers play dirty by avoiding the sick? There are reinsurance provisions, risk corridors, and risk adjustment! Every contingency was planned for--except, of course, for the most important one: relentless political opposition. Frustrated "shoppers" for health plans,  themselves exhausted by the law's complexity, had neither the resources nor the disposition to fight for it.

And one might ask: Should they fight for it? Ethically, certainly: the ACA's Medicaid expansion and tax credits are huge boons to vulnerable populations. But there are cracks in the ACA coalition once many of its supposed beneficiaries ask "what do we get?" Consider a family of four not getting subsidies on the exchange, but still mandated to buy health care each year. Their plan may cost $10,000 annually. Given that the median net worth of households led by a 35-39 year-old is about $40,000, even a 5% chance of medical bankruptcy each year (wiping out all savings) could easily seem like a better deal than a yearly $10,000 drain on household finances. Many of these households also assume that, given EMTALA, they can still get care in case of emergencies. Of course, the ER is no substitute for insurance. But given the typical wealth of even middle class households, foregoing insurance may seem like a rational choice.

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Over the past decade, a small but growing movement has realized that the Rube Goldberg neoliberalism of Obamacare--and many other parts of modern Democratic policy--is not sustainable. I've come to that conclusion painfully and slowly. I've taught the law for six years, and each year I get better at explaining how its many parts work, and fit together. In 2011, I helped organize a symposium on "Accountable Care Organizations," one of many parts of the ACA that were supposed to square the circle of cutting costs while promoting quality. I wanted to help make it work. But I also saw the dark side of the ACA: friends frustrated by their own experience on the exchanges; insurers playing games with network adequacy and formularies; cynical GOP budget moves to sandbag insurers counting on certain subsidies. And we have not even begun to talk about the Supreme Court's states' rights-inspired attack on the Medicaid expansion.

Thinking about the complexity of Obamacare, I was struck by a contrast drawn from Matthew Stoller's perceptive article on New Deal Democrats (from which I draw the image above):

Democrats lost the U.S. House of Representatives just twice between 1930 and 1994. To get a sense of how rural Democrats used to relate to voters, one need only pick up an old flyer from the [Wright] Patman archives in Texas: “Here Is What Our Democratic Party Has Given Us” was the title. There were no fancy slogans or focus-grouped logos. Each item listed is a solid thing that was relevant to [rural voters]: Electricity. Telephone. Roads. Social Security. Soil conservation. Price supports. Foreclosure prevention.

Foreclosure [prevention] protected homes against bankers. Farm-to-market roads allowed communities to organize around markets. Social Security protected one’s livelihood in the form of unemployment insurance and old-age benefits. Price supports for family farms protected them from speculators. And rural electrification and telephones shielded communities from the predations of monopolistic utilities.

Contrast this approach with current centrist Democratic rhetoric. "We are not Denmark," we are told. "It's up to you to navigate the market we're constructing, to shop wisely for the best value health insurance." The New Dealers spoke more simply and magnanimously to their constituents: "The government is giving you this. You deserve it."

As I'll show in a series of posts over the coming weeks, the Rube Goldberg neoliberalism of centrist Democrats does little that concrete. Rather, it tends to hem in middle class voters with means tests and subsidy targeting. Just as a person with Obamacare starts climbing the ladder of pay at a job--whoops!--he falls down the chute of declining premium assistance tax credits and cost-sharing subsidies. The same microtargeting hamstrings those on income-based repayment plans for student loans. Thus the standard GOP rhetoric that Democrats "punish success" resonates. For middle income families, the accusation rings true.

The standard wonkish response is: "families making $70,000 or $80,000 a year are doing great--we don't want to help them too much!" But this pinched redistributionism, focused on reducing subsidies to the middle class amidst skyrocketing incomes and wealth for the 1%, strikes many voters as unfair. As Richard Rorty predicted in the 1990s, in a snippet that went viral this week on Twitter, "suburban white-collar workers--themselves desperately afraid of being downsized--are not going to let themselves be taxed [further] to provide social benefits for anyone else. At that point, something will crack." It just did.

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The 2016 election results were overdetermined. A demagogue has a natural advantage in a 500-day campaign--how else will profit-driven media entertain jaded viewers? Racial, cultural, and gender divides are deep. The FBI and the Russian government interfered with the democratic process in unprecedented ways. Long-standing protections under the Voting Rights Act were gutted. Amidst all that, a centrist Democrat won a popular majority. Is policy change really needed--or just better tactics and number-crunching?

Before answering that, consider the following political trends:

Governors' Mansions held by Democrats: 29 in 2009, 15 in 2016

Legislative Chambers held by Democrats: 60 in 2009, 30 in 2016

US Senate seats held by Democrats & allied Independents: 60 in 2009, 48 in 2016

US House seats held by Democrats: 256 in 2009, 193 in 2016

Moreover, as Lawrence McDonald has also noted, "of the 703 U.S. counties that Obama won twice, 34% broke for Trump in 2016." At this rate, the GOP may control both Congress and three-quarters of state legislatures by the 2020s--a prelude to a constitutional convention that could entrench a laissez-faire consensus for decades.

Until the Democratic Party can answer the "what do we get?" question clearly, convincingly, and fairly, expect these trends to continue. Medicare-for-all was the road not taken in 2009. If it had been chosen, I doubt so many Democrats would be in the political wilderness they endure today. The centrist Democratic policy elite instead placed far too much credit in technocratic, top-down solutionism--which now lies in ruins. It's time to build policies from the ground up, with straightforward and understandable promises for concrete, universal entitlements.

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*I did not mention Medicaid here, because many of the complexities of its expansion are due to the Supreme Court's NFIB v. Sebelius decision. But the Obama administration had own-goals there, too.

Image Credit: Matthew Stoller.
Posted 3:18 PM by Frank Pasquale [link]