Originally published 1/20/11 on Kaiser Health News
While reading “A New Definition of Health Care Reform” by James C. Capretta and Tom Miller, I was reminded of the old adage “if one can frame the debate, one wins the debate.”
The health reform debate, they say, is between those who would use government regulation to try to control growth of health care spending and those who would rely on cost-conscious consumers operating in a competitive market place. The right way to reform health care, they say, is not government regulation but rather by shifting to a defined-contribution system in which people would bear the full marginal costs of insurance they buy. Medicare beneficiaries and Medicaid recipients should be given vouchers for the purchase of health insurance. Employers should do the same with private employees. The recently enacted health reform legislation, they say, extends fee-for-service medicine. For that reason, it should be replaced.
This critique is based on multiple fictions—about what the Affordable Care Act does, about what any plausible alternative would do, and about what the real issues in the current debate really are.
First, the federal health law clearly moves the health care system in the very directions that Capretta and Miller urge—toward a defined contribution system.
• That is true for most of the 16 million people who would be covered through the newly created health insurance exchanges. Subsidized clients in the health insurance exchange will receive vouchers to reduce the net cost of a moderate health insurance plan to a fraction of their income. If people want more generous coverage, they will have to pay for it themselves. That is what defined-contribution coverage does.
• Medicaid also is moving fast away from fee-for-service care toward services provided by managed care organizations operating under negotiated contracts with states. That is how most of those newly covered by Medicaid will be served.
• The law will impose a modest tax on high-cost private health plans starting in 2018. This tax will discourage the provision of highly generous insurance plans that accommodate inefficient fee-for-service care.
Like Capretta and Miller, I wish that tax applied to more plans and started sooner. That it does not results from the refusal of Republicans in the course of the reform debate to do anything else than vote “no.” The first president to embrace limits on the tax breaks for employer-financed health insurance was Ronald Reagan. Republicans have long embraced such reforms. Had they been true to their tradition and participated actively and constructively in this debate, as a previous generation of Republicans did in the debate leading up to the enactment of Medicare and Medicaid, and as Democrats did in the process leading up to the passage of the Medicare Modernization Act in 2003, there is little doubt that coverage of the tax on high-cost plans would have been broader and it would have started sooner.
The next fiction is the idea that there exists some market-based reform that would operate immaculately free of intrusive government regulation. If consumers are to exercise real leverage on insurance vendors, they have to understand the choices they face. That demands that the range of plans be limited to a manageable number, that marketing of insurance plans be highly regulated and that objective literature written in plain English must be available to customers. It also demands extensive risk adjustment of premiums and subsidies for those who cannot afford the full cost of health insurance. All of this will require heavy government involvement. Come to think of it, each of those steps is part of the health law. If a well-functioning private market place is what Capretta and Miller want, they should be celebrating the bill, not joining calls for its repeal.
No, the health reform debate is not about a fictional war between market-based health insurance and government regulation. It is about whether to provide adequate subsidies to cover the uninsured and whether to begin a process of leveraging change in the delivery and payment systems through which one-sixth of the U.S. economy is devoted to health care. Under this administration’s leadership, the last Congress laboriously and narrowly pushed through legislation ending the crippling stasis that virtually all observers of the U.S. health care system deplore. Their handiwork is not perfect, nor can its full effects be anticipated. Further legislation will unquestionably be necessary—to fix provisions that don’t work well and to deal with unanticipated consequences of the legislation. Making that legislation work as well as possible now and figuring out what legislation will make it work better in the future should occupy the nation now, rather than a sterile debate based on a false issue and misrepresentation.
Henry J. Aaron is the Bruce and Virginia MacLaury Senior Fellow at The Brookings Institution.