Why Support the Imperfect Health Care Reform Law: An Extended Path of Progress.


(Appeared in Huffington Post, October 8, 2010.)


In the previous article (“Why Support the Imperfect Health Care Reform Law — Part One“), I made the case that the new Affordable Care Act (ACA) deserves support because of the good it will do for so many Americans and for the health care system as a whole. At the same time, I acknowledged that the law was imperfect and that it will not achieve all we should want to accomplish from reforming the health care system. So, why not go back to the drawing board and try to get it right? The one-word answer is “politics.”

Why support such an imperfect law?

This is only the second time that Congress has even voted on a comprehensive reform package. The other was 1965 when Lyndon Johnson persuaded Congress to pass Medicare and Medicaid. The reality is that enacting the ACA was a monumental political achievement, and the probability of passing another one is practically zero.

Why is that the case? First, passing any law is hard because it requires not just a majority in the House of Representatives, but 60 percent in the Senate. Even within a single party, members have different views of the proper role of government and other matters; so, it is hard to persuade a majority (or 60 percent) to coalesce around reform.

This tendency is reinforced by the fact that the over-riding goal for most members is to get re-elected.

Further, the forces against change have compelling reasons to oppose it. They expect to make lower profits and to operate under less favorable rules. So, they are willing to spend a lot lobbying members of Congress to keep a bill from passing. Some of that money also helps members in their re-election efforts.

In contrast, supporters are a diverse group for whom health care reform is not the over-riding concern and who, in any event, tend to have less money to spend.

This combination of factors makes it very difficult to pass any law much less one that accomplishes all the goals of reform. It also helps explain why, when a president and Congress finally do act, the result — as in this case — is less than fully satisfying? Then, why not leave well enough alone? Why bother with a reform effort that is sure to disappoint?

Why Reforming the Health Care System Is Important

The U.S. spends too much on health care. Our expenditure rate is 5 to 6 percentage points of GDP more than the second most costly country.

Yet, despite spending all that extra money, many people have no access to appropriate care. Moreover, while the countries that spend less cover all their citizens, 16-17 percent of Americans have no health insurance at all and millions more cannot use their coverage because the only policy they can afford requires more cost-sharing than they can pay.

The quality of care is unreliable even for those with money and/or good insurance. And many health professionals’ mistakes are caused by their efforts to cope with dysfunctional features of the present system.

The delivery system itself is deteriorating as a result of the failure to solve the interrelated access, cost, and quality problems. A scary thought: When they become patients themselves, not even doctors can count on getting the care they need or getting it without error.

The need to reform the system goes way beyond the fact that millions of Americans cannot access regular, affordable primary care and other needed services. As the delivery system continues to unravel, no one can be sure he or she will be able to avoid being victimized by its inadequacies.

Why This Reform Law Has Been a Hard Sell

So, why are so many Americans reported to be “angry” at the law’s passage. Why do even some progressives oppose it?

One reason is that much of the public is misinformed about the law’s actual provisions. It is long and complex, opponents have deliberately misrepresented it, and supporters have not responded effectively. In addition, some people were turned off by the “sausage-making aspect” of the legislative process. Many assume that the legislation itself must be as corrupt as the process that produced it appeared to be.

Further, the law appears to fall short because it won’t do all the things proponents touted as the reasons to enact reform. And many of the good things it will do won’t occur for several years. Finally, some fear it is a windfall for insurance companies, which will gain millions of new customers.

Instead, the ACA should be seen, not as an end in itself, but as progress along an extended path toward perfecting a delivery system everyone must count on when they get sick.

Summing Up

The new Affordable Care Act deserves support because, although imperfect, it will provide real help to many Americans and permit us to make real progress toward a better health care system. The alternative is to take no action. But that is not an option because the health care system is already unreliable, is deteriorating still further, and will only get worse unless we act to improve it.

For more detail on the need for the law or the politics of reform, see my book, Still Broken: Understanding the U.S. Health Care System.

Why the Imperfect Health Care Reform Law Deserves Support — 1.

http://www.huffingtonpost.com/stephen-m-davidson/why-support-the-imperfect_b_736872.html  (Appeared September 27, 2010.)

We are being told now that Republicans are serious about undoing the Affordable Care Act (ACA) that the president signed in March. They want to eliminate specific provisions they don’t like and, perhaps even more importantly, to starve it of the funds needed for implementation. Sure, the law is imperfect, but although the case for it is very strong, its supporters have been, if not invisible, ineffective to date. In this article, I outline some of what the new law will accomplish.

The law’s provisions

The case for the law begins with its many positive features, including these: It corrects some of the worst flaws in the private insurance market that have caused untold harm to millions of Americans. Beginning now, insurers can no longer rescind a policy when the insured uses services; set lifetime benefit limits; set annual benefit limits; or deny coverage for children because of pre-existing conditions (2014 for everyone). Insurers must also cover children on their parents’ policies up to age 26 and recommended preventive care and immunizations without charging cost-sharing amounts.

Further, insurers in the large-group market must spend at least 85 percent of premium income on medical care; and those in the small-group and individual markets, at least 80 percent.

In 2014, insurance premiums for covered plans can no longer vary by differences in health status (but only by age, region, whether the policy covers an individual or family, and for smokers).

With tax credits, it will help small businesses offer coverage to employees. Beginning in 2014, everyone will be required to buy insurance, which will make possible larger and more diverse risk pools and help to keep down premiums. An estimated 32 million Americans who do not have it now will be able to get comprehensive insurance.

States will set up special insurance markets (exchanges) for people to buy affordable coverage if they cannot get it through employment. Low- and moderate-income Americans will be eligible for subsidies to help them buy coverage; and out-of-pocket cost-sharing will be reduced so they can use covered services. Finally, Medicare beneficiaries who reach the “doughnut hole” in the Part D drug program will receive a $250 rebate in 2010, and the hole will close completely in 2020.

The law’s limitations

On the other hand, the new law has limitations. Fee-for-service will remain the principle method for paying providers. As a result, incentives that tend to increase the volume of services provided will continue to dominate the system and will contribute to increasing overall spending.

At the same time, containing health care costs will be difficult without also cutting benefits or the quality of care because insurers will have few tools available for the purpose. The new law — justifiably — will constrain their ability to cut benefits or increase cost-sharing, two ways they kept down premiums until now. Proposals to moderate these effects did not get enough support to make it into the final bill. Bottom line: Unless insurers pay providers for “taking care of people” instead of for individual services, providers will not have an incentive to find innovative ways to serve their patients, and it will be hard to keep spending from continuing to rise.

Nonetheless, the CBO estimates that federal spending will decline over 10 years and per capita spending should decline, as well. But overall health care spending will probably increase in part because more people will have insurance and be able to use services they cannot afford now.

Other points

Other developed countries cover everyone, spend less, have more reliable quality of care, better health statistics, and more satisfied citizens. Why can’t we do what they do? Why should we be satisfied to leave things as they are?

Some may be opposed because they really wanted cost-containment, but got expanded access to insurance and care instead. Yet, if access doesn’t increase, the only way our insurance system can control spending is by cutting benefits or quality of care.

Many assume that the access provisions primarily benefit poor people who don’t work or vote. In fact, however, almost all of those without insurance do work — sometimes more than one job. Their employers either offer coverage that is too costly for many to afford or do not offer insurance at all. And since both those trends are growing, few can count on keeping their good coverage.

Finally, private insurers will be free under the new law to develop innovations that could stimulate health care providers to find ways to improve quality of care and efficiency, but to date, they have shown little interest in doing so.

In the end, the new Affordable Care Act deserves support because, although imperfect, it already provides real help to many Americans and permits us to make real progress toward a better health care system. The alternative is not a better law, but no action. Yet we can’t afford that because the health care system is already unreliable, is deteriorating still further, and will only get worse unless we act to improve it.

Note: For more detail about why reform needs support, see my book, Still Broken: Understanding the U. S. Health Care System, especially the first 5 chapters.

Support the New Health Care Reform Law


Support the New Health Care Reform Law
August 22, 2010

Stephen M. Davidson

We are told that supporters are having a hard time persuading the public that the Affordable Care Act enacted this spring, is a good thing. Some progressives are withholding support because they wanted the law to go further. But whether Democrats or independents, they should have no doubts. The law deserves their support. Read More »

Lesson for Reform: Politics is at the heart of every health care

Lesson for Reform:  Politics is at the Heart of Every Health Policy Debate.  Swarthmore College Bulletin.  July 2010, 36-41.  http://media.swarthmore.edu/bulletin/?p=439

Lesson for Reform

Politics is at the heart of every health care policy debate.

By Stephen Davidson ’61

PRESIDENT BARACK OBAMA’S SUCCESSFUL EFFORT to enact a health care reform bill was widely seen as a triumph of policy, and it is hard to overstate the historic nature of the achievement. But any assessment of the legislation that emerged from the yearlong effort is best made through a political lens. The story of health care reform in the United States—and, indeed, almost any major policy issue—is fundamentally a story of our politics.

When examining public issues, policy analysts—and I include myself in this professional category—generally acknowledge that politics play a role, but most tend to spend little time on it. In the recent health care reform episode, most of their articles, blogs, and op-eds discussed substance. Even the media, which usually is more interested in the horses than the race, often focused on the substantive issues: Who should be covered? What should they be covered for? What can be done to keep down costs? How should the program be paid for? And when should the various provisions become effective? Read More »

Round 1.5: Maximizing the Benefits of Health Care Reform.

Huffington Post, July 13, 2010 


The imperfect health care reform law President Obama signed in March was no one’s first choice. Recognizing the progress in its provisions, however, some have called it Round 1 on the road to a more perfect system. And while it focused primarily on expanding access to coverage, they expect the primary focus of Round 2 to be on keeping costs under control. But since Congress will not want to take up that challenge soon, the current implementation phase, Round 1.5, demands our attention.

Make no mistake: whatever its limitations, the new law was not only a huge legislative accomplishment, but also a big step forward for both individual Americans and the health care system as a whole. It mandates that, beginning in 2014, virtually all Americans buy affordable coverage. It expects states to create health insurance exchanges on which private insurers will offer coverage for small businesses and individuals unable to obtain it otherwise. Federal subsidies will help those who cannot afford an available policy to pay the premiums and required cost-sharing amounts. As a result, more than 30 million additional Americans will gain access to comprehensive health care coverage.

Further, it permits parents to continue to cover unmarried children through age 25 and reforms the private health insurance system. Insurers will no longer be able to refuse to sell to people with pre-existing conditions or other risk factors, charge them more for coverage (except for age), cancel or refuse to renew policies for people using services, or impose limits on benefits. Insurers have done all these things, justifiably earning the public’s enmity.

Nonetheless, while the accomplishments in the law itself are substantial, the actual benefits will depend on implementation. Moreover, the challenge is particularly great because the underlying reform strategy is relatively weak. Here is why: To accomplish the main goals of reform — increasing coverage, containing expenditures, making quality of care more reliable, and restoring the deteriorating delivery system — competing private insurers have only three ways to differentiate themselves in order to attract customers, and two of them reduce the value of the insurance.

First, they can set their premiums low enough to attract customers. But to do that, they need to control what they spend on care, and the only two ways to do that are either to sell policies to low-risk people unlikely to use services and, therefore, to spend much on care; or to limit what is covered and the terms for accessing it. Since both have caused much hardship and undermined the value of coverage, Congress reasonably banned many such practices, as noted. Faced with these constraints, what will insurers wanting to participate in the new program do to protect their profits? And how can the law’s potential benefits be maximized?

One thing to expect is that insurers will participate actively in the processes states use to create their exchanges. They will look for ways to get around provisions regarding the content of coverage and for permission to raise premiums and cost-sharing amounts. One of the few options left to them is to offer several levels of coverage. The least expensive (bronze) requires them to pay only 60 percent of the actuarial value of medical bills, leaving patients to come up with the remaining 40 percent. Insurers will try to influence the exchanges to define allowable costs in ways that minimize their exposure and increase that of the individuals using services. If they succeed, many who can afford only bronze plans will pass up beneficial services, just as 25 million underinsured Americans do today.

Insurers also will try to ensure that they are well represented on the exchanges’ governing bodies. One goal will be to form alliances with providers and others in the on-going decision-making processes.

To maximize the new law’s benefits under these conditions, insurers should be required to use their third lever (regarding the content and terms of coverage) to change the way they pay for care. Now, they pay fees for individual services, which tends to encourage provision of additional fee-producing services. That is especially likely when insurers limit individual fees, making it harder for doctors to keep up with their own rising costs. Instead, they should be required to pay providers, not for individual services, but for “taking care of people.” Insurers could pay providers a monthly amount for each enrolled patient. Providers, in turn, could aggregate the monthly fees received into a budget and find innovative ways to take good care of patients while reducing the volume of individual services of marginal value. For example, instead of seeing patients only when they are sick, they might encourage them to come for age-appropriate screening tests to try to catch potentially serious conditions early enough to deal with them inexpensively – rather than waiting until they develop into debilitating illnesses that require costly services. It may even make sense to have nurses visit bed-ridden chronically ill patients in their homes to keep them from developing expensive, hard-to-treat secondary conditions.

Since we already saw that insurers can do little to control spending on care, expenditures will continue to rise unless steps like these are taken. Thus, for good things to happen, representatives of the public interest must travel to state capitals and join the exchange-creating process, too. And later, exchange officials will need to use their regulatory authority to force insurers to serve the public interest.

The new health care law is an opportunity for the U. S. to catch up to all the other developed countries in the world whose citizens are guaranteed good coverage and which spend much less on care and produce better health statistics. The unanswered question: Can we muster the determination to seize this chance?


Health Exchanges

New York Times Letter, August 10, 2010 


To the Editor:

Re “A Fair Exchange” (Op-Ed, July 28):

I agree with Frank Micciche that creation of the state health insurance exchanges is a key to achieving health care reform’s lofty goals.

But I do not understand why states need flexibility “to determine which benefits their exchanges must offer” because “each state has different needs.” For policy holders, health insurance has only one goal: to help them pay for needed medical care. One of the new law’s regrettable provisions already permits health insurers to offer four levels of plans. The least expensive ones reduce the comprehensiveness of coverage by requiring more out-of-pocket payments — up to 40 percent of the cost of services.

People who can afford only less expensive plans often cannot pay the out-of-pocket cost of the care they need. That is the story of the 25 million underinsured Americans who value insurance enough to buy it, but then find that it does not provide access to needed care because of the high cost sharing.

Instead of giving states flexibility to vary the content and terms of coverage still more, federal regulators should require that the states’ exchanges carry out the intent of the law by making comprehensive coverage accessible to those who do not have it through employment.

Stephen M. Davidson
Boston, July 29, 2010

The writer is a professor at the Boston University School of Management and the author of “Still Broken: Understanding the U.S. Health Care System.”

The Next Chapter in Reform

The next chapter in reforming healthcare

Jun 23, 2010 15:44 EDT

health care reform | health insurance | Obama


The following is a guest post by Stephen Davidson, a professor at Boston University’s School of Management and author of “Still Broken: Understanding the U.S. Health Care System.” The opinions expressed are his own.

President Obama brought back the healthcare debate yesterday by telling a White House audience, “I refuse to go back. And so do countless Americans.”  Obama drew attention to the consumer protection regulations developed to implement the new law. Given the continuing controversy surrounding the new law and the relentless criticism from its opponents, the president’s remarks highlighted some of the law’s most dramatic early benefits.

Obama’s healthcare address was an early entry in what will undoubtedly be a series of efforts that emphasize how Americans will benefit from the healthcare bill.  The political reality is that as the fall elections approach, the administration must continually inform the public of the beneficial effects of the reform so Democrats get electoral credit come midterm elections.

In the meantime, let’s take a take a step back and look at what the bill that was signed into law three months ago promises to achieve.

The new law makes substantial progress toward the kinds of systems found in other developed countries, which is a good thing. Those systems cost much less to run, cover all their citizens, and provide greater patient satisfaction and better health results. Beginning in 2014, America, too, will provide healthcare to almost all its citizens by mandating most Americans to buy affordable coverage. Federal subsidies will help those who cannot afford an available policy to pay both the premiums and cost-sharing amounts required. The result will be that more than 30 million additional Americans will gain access to affordable and comprehensive health care coverage.

Additionally, private insurers will be forced to improve their coverage by allowing parents to cover unmarried children through the age of 25 and by no longer being able to do the following:
–refuse to sell to people with pre-existing conditions or other risk factors
–charge more to subscribers with pre-existing conditions or other risk factors, with the lamentable exception of age
–cancel or refuse to renew policies for people who use services
–impose annual or lifetime limits on benefits

There is more left to be done, but these are substantial accomplishments. Other results of the bill will depend upon its implementation. States will establish exchanges on which participating insurers offer competing policies. The rules each state sets will determine the extent of the public benefit. Certainly, insurers will try to influence those rules to mitigate the effects on them.

Despite many attempts over the last 80 years, only one president was able to get the two houses of Congress to even vote on a healthcare bill. That president was Lyndon Johnson and the result was Medicare and Medicaid. The lessons from prior reform efforts help explain why the administration chose to rely on competing private insurers to achieve the goals of reform. The administration figured this strategy would give them the best shot at passing a bill, but the fact of the matter is that it is a weak strategy that few health policy analysts would have selected in the absence of political considerations. The reason:  insurers have very limited ways to differentiate themselves in a competitive market.

One way is to keep premiums lower than competitors’ so that potential customers will choose their coverage. To do that they need to keep their costs down, but have only two ways to do so, both of which weaken coverage: one is to limit their customers to young, healthy people unlikely to use many services; the other is to limit the content and terms of coverage. Since this causes hardship for many Americans, the new consumer protection provisions banned insurers from doing so. Therefore, since insurers can do little to limit their expenditures in order to limit premiums, they will try to reduce the effects of the bill’s new limitations by influencing the rules adopted by the state exchanges during the implementation process.

Under the new law, one of the options left to insurers is to offer several levels of coverage which vary by the amount of cost shared by the patient. The least expensive, the bronze level, requires insurers to pay only 60 percent of the medical bills, leaving patients to pay the remaining 40 percent out of pocket.  Many who can afford only the bronze level plans will be forced to forgo getting expensive tests done or filling prescriptions because they can’t afford to pay for the out-of-pocket portion for those services. This is already the case for today’s 25 million underinsured Americans. There are silver, gold, and platinum levels that cover more of the cost, but also cost more to have.

The bottom line? Since insurers can do little to control spending on care, premiums will continue to rise. Effective regulation – now being hammered out in Washington – will be needed to ensure that the efforts of the private insurance companies to cope with the new law do not undermine its goals.

The new law is a milestone that will cover almost everyone for all useful services and will cost less per capita than our present system, but the job is not finished. There are more regulations to decide upon to implement other components of the bill. With each new decision there is potential to improve the system even further, but there is also the same amount of potential to slip very far back, or even to make things worse than they are now. It is a sure bet insurers will try to influence officials at both federal and state levels to compensate for the constraints the new law places on them so unless the public weighs in as well, the rules will be written in favor of  insurers and wind up eroding the potential benefits to the public. That next chapter is being written now. It’s up to us to join in that effort.

Boston Globe Letter, 6.5.10





 Revise the process

 That the state’s largest health insurers seek double-digit rate increases is cause for concern among those who depend on them to help pay for the high cost of medical care (“2 insurers again seek double-digit increases,’’ Page A1, June 3). In the short run, if they are approved, employers that offer coverage will raise cost-sharing amounts or cut benefits, and more insured people will have trouble paying for needed services.

In the long run, as long as insurers pay for individual services, this story will repeat every year because their costs, like the cost of everything else, keep going up.

Insurers need to start paying, not for the individual services used, but for taking care of people. Then provider groups can aggregate the funds into a budget, which they can use in creative ways to provide the most benefit to their patients. In the process, they will avoid unnecessary services and their associated costs.

Until that happens, we can expect to see this story again, with increasingly harmful effects.

Stephen M. Davidson


The writer is a professor at Boston University School of Management and author of “Still Broken: Understanding the U.S. Health Care System.’’


New Book Now Available

New Book Cover

Based on over 30 years of study, this book is for people who want to understand why the health care system is so important for us, how it really works, what caused the problems that have grown to monumental proportions in recent decades, how we can solve them, and why we have failed to overcome the problems for so many years. It describes six elements that are critical to a successful reform plan and how various compromises with those elements can affect what a new law will produce.  It will also help the reader understand why the new law will make substantial progress toward achieving some reform goals, but leaves more to be done.

The new law will require that almost everyone have insurance, create an insurance market for those without employer-based coverage, establish minimum standards for coverage, and subsidize those who cannot afford available policies. But the book’s title reflects the fact that, even though the newly enacted law includes the most substantial reforms since adoption of Medicare and Medicaid in the 1960s, reform is still a work in progress.  Millions of Americans will continue to have access problems and, as a nation, we will still pay too much and get too little from a system that will continue to get worse — primarily because it will not have strong incentives for providers to make it better.  The book will help readers understand the new law and draw their own conclusions.


Politico Posting: Kagan for the Supreme Court

I have 2 main thoughts about this, one less serious than the other.

The less serious one is that this complaint reminds me of the famous statement by Sen. Roman Hruska when he commented on one of Richard Nixon’s nominees who was coming under fire as being unqualified. He said something to the effect that even mediocre people deserved representation on the court. (Though in this case, I guess you could argue that Ivy Leaguers are already well enough represented.)

More substantially, the key question concerns the nominee’s sensibilities, particularly the extent to which he or she can see the implications of the several decisions that could be made on an issue and even more especially, the effects on ordinary people.

And, then, having seen them, he or she determines that they are important and need to be considered in reaching a choice. A person who has come from an impoverished background and succeeded in achieving prominence for his or her accomplishments may, like Clarence Thomas, be insensitive to the impact of his decisions on people in similar situations. On the other hand, some born to privilege, who were also talented and reached prominence, but had social and economic advantages that helped them get there, may be able to envision those implications and care about them with much more sensitivity. (John Roberts is a counter example.) So, the fact that Elena Kagan came from the upper west side of New York, went to Princeton, Oxford, and Harvard, and achieved prominence in her profession, is important. But her ability to put herself in the shoes of others with fewer advantages, when coupled with her obvious talent and the experience she has already had with people who, like the other justices, are smart and powerful, is what would make her a distinguished justice if, in fact, she is confirmed.

Original Politico Posting Here