David Coates

Placing the Affordable Care Act in the Wider Debate on Healthcare Systems


            Right now, hysteria inside the Republican Party about the flaws of the Affordable Care Act is running very high indeed. So high in fact that Representative Todd Rokita (R-IN) was not treated as mentally insane by his party’s leadership last week for denouncing Obamacare as “one of the most insidious laws ever devised.”[1] Nor was Representative William O’Brien (R-NH) dismissed by them as an idiot for likening the Affordable Care Act to the nineteenth century Fugitive Slave Act.[2] It is that hysteria which has currently persuaded Republicans to shut down the government and might yet persuade them to impose on the global economy an American debt-default. That hysteria, therefore, is doing real damage both at home and abroad; which is why it would be a good idea to replace it, wherever possible, with a calm and informed conversation about the real choices we all face when designing and implementing modern healthcare systems.

One way of moving from demagoguery to discourse on the Affordable Care Act might be to consider and discuss the following six points.

·         Funding Choices No healthcare system is without problems, and those that currently beset the American one are not the product of the Affordable Care Act. The issues that are so contentious here are also contentious abroad. They certainly are in the United Kingdom. More than a decade ago, Tony Blair’s Labour Government commissioned the Wanless Report,[3] as it pondered how best to reform the National Health Service (NHS), the U.K.’s version of a single-payer system. That report mapped for the Blair Government the strengths and weaknesses of the four main ways of funding healthcare then in use in leading economies – healthcare funding from general taxation, by social insurance, from direct payments by patients, or by private insurance – and suggested that each of those funding methods had a set of endemic strengths and weaknesses. Systems relying on general taxation were good on overall cost control and at providing universal access to services, but tended to be poor on consumer choice and tight on resources. Social insurance systems had little incentive to restrain health-care costs – they could always raise rates – and imposed extra burdens on employers, but were good at getting health care to everyone. Having people buy their own health care certainly constrained costs and maximized choice for those able to pay, but made access by the poor very difficult to guarantee. And systems based on private insurance were fine if your employer provided it and could give you lots of choice, but such a method of running a healthcare system necessarily penalized those without an employer, or with an employer who was unwilling/unable to provide healthcare insurance.

·         Markets & Healthcare In the event, the Blair Government decided not to fundamentally redesign the U.K.’s single-payer system, remaining convinced that markets for healthcare never work like markets for other privately-consumed commodities. Buying healthcare and buying broccoli are qualitatively different processes because, in accessing healthcare (as Gordon Brown, then Blair’s finance minister, put it in response to the Wanless Report) “the consumer is not sovereign: use of healthcare is unpredictable and can never be planned in the way that, for example, weekly food consumption can.” In healthcare, Brown argued, market processes are necessarily distorted by “the combination of, on the one hand, chronically imperfect and asymmetric information, and the potentially catastrophic and irreversible outcome of healthcare decisions based on that information and, on the other, the necessity of local clusters of medical and surgical specialisms.” Or as he put it more simply: in healthcare “price signals don’t always work, the consumer is not sovereign, there is potential abuse of monopoly power, it is hard to write and enforce contracts, it is difficult to let a hospital go bust, [and] we risk supplier induced demand.”[4] So the U.K. remained with its much-beloved single-payer system, and is now locked in an equally intense political debate about the use of market mechanisms within the NHS – market mechanisms the new Coalition Government think will enhance quality and cost control, and which its critics think will produce inequalities in healthcare provision and lead to a two-tier system favoring the rich.[5] That debate will be ongoing in the U.K. and elsewhere precisely because balancing equality of access to healthcare with market ways of generating cost-effectiveness is perennially difficult.[6]

·         The Complexity of the American System For our purposes however, the intensity of the current U.K. debate – informative as it is – is actually less important than the fact that the U.K. has one national system to debate about. There is a small private healthcare sector in the U.K., but over 80% of healthcare comes from the NHS itself. And that is true of each major economy except the U.S. Each has one main system (Germany and France each rely on social insurance, Sweden, Canada, and Australia all rely on general taxation); and accordingly each struggles to ameliorate the weaknesses of its predominant method of funding without losing the associated strengths. The key thing that we need to grasp about the US healthcare system is that within it there is a mixture of all four forms of funding;[7] with the entire system in consequence accumulating the weaknesses of each and adding additional weaknesses rooted in the system’s own unique complexity. The four systems in place before the arrival of the ACA? General taxation for the VHA and Medicaid; social insurance for Medicare; private insurance for those lucky enough to have employer-provided healthcare coverage; and the direct purchase of insurance/services by those less fortunate. The system is complex and costly: certainly right now we combine the low access characteristic of private systems with the lack of cost-control characteristic of insurance based ones. No wonder therefore that we spend so much more of our GDP on healthcare than do other advanced societies, and yet achieve health outcomes that are comparatively so poor.[8]

·         Agendas common to all systems Some of the things generating healthcare cost-inflation are uniquely American, but most are not. Among the specifically American cost-drivers  are: too heavy a reliance on fee-for-service rather than per-capita payments to doctors, heavy malpractice insurance and excessive defensive medicine; and burdensome debts acquired during medical training. But no matter what system of healthcare funding is in place, common problems of demand and supply trouble each – problems largely linked to the success of modern medicine. As scientific medicine developed, popular expectations for ever-better health developed alongside it. People live longer now because of improved medical knowledge; and with more consumers and ever-more sophisticated medicines and procedures, costs have risen faster in all healthcare systems than in the economies on which they depend.  With modern life styles, new illnesses have proliferated as old ones are cured: less TB and polio now, more obesity and high blood pressure. Healthcare systems across the industrialized world struggle with cost containment in a context of new demands from patients and new drugs from the pharmaceutical industry; and in consequence each national healthcare system has to find a way of rationing provision and establishing priorities. Medical services can only be rationed in certain ways. They can be rationed by need. They can be rationed by price. They can be rationed by timing (the U.K.’s famous waiting lists): but they have to be rationed somehow. There is never enough healthcare to go round, no matter which healthcare system, and which underlying funding model, is in play. And beneath each such model, a basic social contract has continually to be reassessed and sustained: a contract between the healthy and the sick, between the old and the young, between men and women, between rich regions and poorer ones, and between those who look after their own health by sensible living and those who do not.

·         The ACA as quintessentially American The United States has acquired such a variegated set of healthcare systems because political debate here never generates unanimity about the desirability of any one of the four ways of financing healthcare that the Wanless Report identified. Twice (under Truman and Clinton), Democratic presidents made a serious attempt to introduce universal coverage, but each time the political coalition to implement such a radical change failed to materialize. So instead, here in the United States access to publicly-funded/supported medicine expanded by category of people. It was provided first to veterans immediately after World War II, then to the old and the poor (Medicare and Medicaid in 1965), then to the children of the near poor (SCHIP in 1996), and now to the low-paid without employer-provided healthcare (via the Affordable Care Act). The ACA is simply the latest in a series of incremental changes to an already complicated and confusing healthcare system. Whether it is an ideal addition or not is in dispute; but what should not be in dispute is its place in that prolonged series of incremental reforms by which the United States has moved from a healthcare system in which people bought healthcare only if they could afford it, to one in which access to healthcare is less and less a matter of the patient’s immediate personal financial capacity.

·         The Unavoidable Choices What the ACA does is to move slightly the position occupied by the United States on that basic continuum of healthcare provision that stretches from private provision at one end to a single-payer system at the other.  At one end of the continuum, fully-privately funded healthcare systems have access problems linked to income inequality. The U.S. has lots of income inequality. At the other end of the continuum, single-payer systems have problems of cost control due to patient overuse. Critics of the ACA fear that development here. And systems in the middle of that continuum (those distributing healthcare support by category of people, as the ACA does) inevitably have boundary problems, with subsidized healthcare tapering off as people move out of the category. Medicaid has that problem big time – as people raise their incomes over the poverty level, they lose access to free healthcare. The ACA attempts to ease that boundary problem by phasing out subsidies only as incomes rise well beyond the poverty level: but the boundary problem doesn’t go away. It just shifts to employees earning more than four-times-the-poverty-level, and to firms employing more than 50 workers.

So we would do well not to be hysterical about the consequences of the ACA. Those consequences were predictable, once the choice of some middle-way solution was made. Whenever you go for a compromise model in the middle of the basic continuum of healthcare systems, you inevitably ease access while increasing total health costs – both effects achieved through letting more people in. You also inevitably create new boundary problems on the edge of the categories of the people you help; and you inevitably offend those who advocate either a fully market-based system or a single-payer one, because any “mess in the middle” necessarily fails to garner the full advantages of a single and consistent system. Many of us outside the ranks of the Republican Party would prefer a single-payer system to the ACA’s complicated alternative, and will no doubt keep pressing for that. Many of us know that fully market-based systems accentuate access issues, leaving greater numbers of people uninsured; so that we don’t want to go back to purely market-based healthcare. Many of us know too that, had the ACA moved further along the continuum (not least by including a public option in the health exchanges), it would have lowered the trajectory of rising healthcare costs more than does an ACA without such an option. Indeed, such an option was in the original design. It was dropped only during (and because of) the negotiations that squeezed the Affordable Care Act through a Congress dominated by conservative Republicans and blue-dog Democrats (especially the latter, in the case of the ACA).  It was not faulty system-design that got in the way of the creation of a single-payer system this time round. It was politics.

The choice for liberal critics of the Affordable Care Act is a stark one. One option is for advocates of a single-payer system to join Republicans in repealing the Act, so moving the United States back towards a fully market-based system before trying again to achieve wholesale reform. The other is to support the Administration as it implements and beds-in an admittedly flawed Affordable Care Act, and then to campaign for additions to it – not least by the creation of a public option – to move us still closer to universal healthcare free at the point of use for all. Speaking personally, it is not a difficult choice to make. Letting the perfect block out the good is too high risk a strategy for me. Better we build on what we have, knowing that the forces pushing for a return to market-based healthcare provision are currently strong enough without the addition of liberal voices.

[6] On this, see Susan Giaimo, “Who Pays for Health Care Reform?” in Paul Pierson (editor), The New Politics of the Welfare State. Oxford: Oxford University Press, 2001, pp. 334-67.

[7] Ezra Klein, “The Health of Nations,” The American Prospect, May 2007: available at http://prospect.org/article/health-nations

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David Coates holds the Worrell Chair in Anglo-American Studies at Wake Forest University. He is the author of Answering Back: Liberal Responses to Conservative Arguments, New York: Continuum Books, 2010.

He writes here in a personal capacity.

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