Happy Birthday Medicare and the Affordable Care Act?
This is an anniversary year for both Medicare and the Affordable Care Act (ACA). Medicare was passed 50 years ago in 1965 and the ACA was passed five years ago. These anniversaries bid us to consider lessons that can improve our healthcare system instead of accepting the benign neglect implicit in much of public discourse on health.
Both programs are enjoying slower than expected growth in healthcare spending, affording a welcome opportunity to address some challenges these programs face. The Great Recession and the proposals for limiting healthcare cost growth are likely the main reasons for the slowdown. Tough economic times mean less spending on everything, and we’ve seen little acceleration in healthcare spending despite modest economic recovery. Promised innovations in new payment systems and changes in incentives to deliver care likely have dampened cost growth as providers anticipated these reforms, and we may see more of same when innovations are implemented. Medicare and ACA impacts reinforce each other: ACA enabled such innovations as bundled payment plans and accountable care organizations to better coordinate care but Medicare is the main implementer.
Ironically, the good news of slower spending hasn’t been recognized by the public or policymakers. Lower spending on Medicare and ACA plans makes comprehensive insurance more affordable. Yet, the political discourse remains fixated on gloom and doom. A better response would be to act on these issues:
Both programs are rightly faulted for their high out-of-pocket costs.
Medicare’s high out-of-pocket costs and lack of a limit on overall patient burden are no secret. Under the ACA, individuals’ deductibles in many plans are very high. High deductibles help plans hold down the costs of premiums, but can also reduce access to care. And, if people delay or forego important care, low access can mean higher costs when their health status deteriorates and they must get more intensive treatment. Most studies of cost sharing suggest that making people put “more skin in the game” does little to encourage more efficient use of care.
Ironically, the most frequently voiced proposals for changing Medicare and the ACA worsen this Hobson’s choice. Political support remains mired in the view that high cost-sharing saves money. For example, penalizing Medicare beneficiaries who turn to supplemental insurance for extra protection is part of the “fix” to Medicare physician payments that may soon pass Congress. And advocates of scaling back the ACA would reduce subsidies, raising premiums and ramping up pressure on plans to hold down their costs by shifting more costs to patients. Better would be making benefits more comprehensive, particularly as we discover other ways to encourage more efficient and high quality care.
Health care insurance in the U.S. is complicated and clumsy.
The complexity of health insurance guarantees complaints and problems. Medicare’s awkward multi-part structure stems from political compromises made in 1965. And the ACA bears the scars and patches of the tough battle to get it passed. Anticipating political resistance, lawmakers tried to limit market disruptions and allow state-level variations to move away from a “one size fits all” approach. Instead, the law spawned a bewildering array of choices for consumers. One lesson to take to heart here: consumers don’t value choice as much as they yearn for simplicity and ease of use.
Unfortunately, our political system makes it hard to simplify and improve these programs. If competing interests can’t be tamed and political wrangling toned down, our awkward jerrybuilt structure for health insurance will persist. Policymakers could get a lot of credit by streamlining these programs.
The ACA’s narrow networks limit access to providers while provider choice is almost unlimited under traditional Medicare—but each causes problems.
Many private insurers have held down costs by offering limited networks of providers. The theory of steering patients to more efficient, high quality providers of services is laudable. But, in practice, these networks often reflect expediency rather than carefully designed choices of high quality providers. Patients cling to the comfort of provider choice in a world of uncertain information about quality and effectiveness. Traditional Medicare offers that wide choice but in a poorly coordinated and inefficient way. Neither the ACA’s squeeze on choice nor Medicare’s flexibility has led to high quality care delivery. The right—but so far elusive—formula would give consumers leeway in picking providers but steer them to those who offer high quality care. That could hold down costs and improve care—and reassure patients at the same time. It should be a high priority goal of any strategy for innovation.
So what will this anniversary year commemorate? Will we make improvements or accept as inevitable the intransigent political divide? Or will supporters and opponents keep seeking the advantage while important but potentially resolvable problems are left to fester?
Marilyn Moon is an Institute Fellow and director of AIR's Center on Aging.