Health-Care Reform, 2015
What the next health-care fight will look like—and why it might be even harder than the last one.
Maintaining the redistributive aspects of health reform will thus be a formidable challenge. The promise of 30 million newly insured Americans and significant reductions in federal budget deficits are contingent upon the full implementation of the taxes, fees, and offsets in the bill, some of which do not take effect until after the presidential election of 2016. These include roughly $4 billion in annual fees on the pharmaceutical sector, and $8 billion to $14 billion in annual fees on health insurers, as well as limits on tax deductions and tax-favored accounts for medical care mostly used by higher-income taxpayers. Even though most Americans are not highly supportive of tax cuts, Republicans have proved quite adept at using them as a political battering ram. Moderate Democrats have repeatedly been willing to support tax cuts in the past or to oppose scheduled tax increases. With an energized GOP base stoked by Tea Party enthusiasm, the anti-tax pressure is likely to become even more intense.
Reformers should not underestimate the power of the GOP anti-tax crusade–or, for that matter, the party’s anti-regulatory zeal. When the frontal assault on the individual mandate is repelled, the progressive tax provisions in the bill will be the next target, along with the interlocking requirements on employers and insurers designed to guarantee that public financing is backed up with employer contributions and insurance-company restraint. We can also count on Republicans to continue to oppose changes in Medicare designed to build on its past success in restraining costs (though, fortunately, most of these changes are out of Congress’s hands). At the state level, conservative governors and legislators will continue to wage modern-day nullification campaigns, which federal officials will have to resist aggressively at every turn.
And conservatives won’t be the only political force seeking to blunt the law’s effects. Medical industry players–private insurers chief among them–will also be doing everything they can to shape what states do. The grand bargain was supposed to be that insurers would face greater competition in return for millions of new customers. Insurers will get the customers. But with the industry growing more consolidated by the day, they are not likely to face much greater competition. And with the highly visible moment of reform having passed, their lobbyists–joined by representatives of providers, business groups, and other organized interests affected by the law–will be back in the saddle again. Just because they received major concessions doesn’t mean they won’t push for even more. Reformers, backed up by the federal government, will need to push back.
Renovating and Improving the Starter Home
If reformers play just defense, they will be stuck protecting a law that has two notable problems: It is not designed to ensure that everyone is covered; and it is not capable of seriously reining in medical inflation. (Isabel Sawhill and Greg Anrig discuss health-care costs and the deficit in the current issue.)
The first problem is the easier of the two to tackle, at least in policy terms. In our predominantly employment-based system, there are only two routes to seamless guaranteed coverage–requiring that employers provide coverage or contribute toward its costs, on the one hand, or severing the financial link between employment and health benefits by raising the funds for subsidized coverage through alternative means, on the other. The ACA embodies an uneasy hybrid of these two approaches: somewhat weak coverage requirements on the largest employers, but none on those with fewer than 50 workers, and no guarantee that those without coverage through employment will receive insurance through the exchanges or Medicaid.
From a policy standpoint, the creation of a new funding stream outside of employment–say, a value-added tax whose revenues are dedicated to subsidizing health coverage–has a lot going for it: It could ensure a stable revenue stream, serve other policy goals (such as encouraging savings), and delink health insurance from its precarious connection to employment. Yet it also has notable drawbacks. For starters, it requires frontally challenging the GOP anti-tax crusade. Given the controversy already surrounding reform, this may be a bridge too far. Moreover, a separate revenue source will not have any direct, tangible connection to the benefits of reform, as did the Social Security payroll tax. President Franklin Roosevelt famously said, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my Social Security program.”
For these reasons, the more promising route may be to build on the existing law to fill in its gaps. One way to do this would be to strengthen the employer requirements to turn them into an automatic source of affordable coverage for workers. In practice, this would mean extending the employer coverage provisions to employers smaller than 50 workers, eventually reaching all employers, including the self-employed. It would also mean transforming the penalty–currently $2,000 per full-time employee (excluding the first 30 employees) for most employers–into something closer to a “play-or-pay” mandate in which uninsured workers’ coverage is automatic through the exchange (or Medicaid) when their employer pays a dedicated payroll-based contribution.
Exempting small employers entirely from the coverage requirement, as under the current law, has two salient drawbacks. First, it means that millions of Americans do not receive automatic coverage at their place of work. More than half of the working uninsured are either self-employed or work in firms with fewer than 50 workers. Because these firms are not required to contribute even a token amount on behalf of their workers, coverage for these workers has to come through Medicaid outreach or enforcement of the individual mandate, neither of which is likely to work as well as simply signing workers up for employer- or government-sponsored coverage at their place of work.
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