Portside

The federal government shutdown that started on October 1 resulted in a telling virtual irony. Thanks to the standoff in Congress, the government’s web presence—from the Census Bureau data portal to the National Zoo’s “pandacam”—was replaced by “Sorry, back soon” screenshots. Meanwhile, the website associated with the Affordable Care Act (the original object of the standoff) ran out of bandwidth due to overwhelming interest in the new health insurance exchanges. It was as if Congress closed the pool because they thought they saw a turd floating in the shallow end, and everyone jumped in anyway because they knew it was really a chocolate bar.

A larger irony is that the ACA is about as far from a government takeover of health care or the “final leap to socialism” (as Michele Bachmann sees it) as one can imagine. Such hyperbole is now about a century old. In 1917 insurance executives raised the fear of “Prussian” or “Bolshevik” medicine. In the 1940s the American Medical Association fabricated a quote from Lenin—“socialized medicine is the keystone in the arch of the socialist state”—to punctuate its Cold War campaign against public health insurance. During the early debate over Medicare in 1961, Ronald Reagan warned that “you and I may well spend our sunset years telling our children and our children’s children what it once was like in America when men were free.” These scare tactics usually worked. The power of southern segregationists in Congress doomed much of the New Deal’s timid universalism. Deference to the AMA virtually immobilized health reform in the 1940s and 1950s. Job-based coverage emerged as the next-best bet, while public policy retreated to occasional efforts to mitigate its failures—most notably with the passage of Medicare and Medicaid in 1965. Since then efforts to appease health care industry interests and avoid the “socialized medicine” label have routinely turned good intentions into bad policy or legislative shipwrecks. Republican pollster Frank Luntz’s now-infamous 2009 memo “The Language of Healthcare” set out the basic talking points that would later pepper Ted Cruz’s filibuster: any public program or option is a slippery slope to “government takeover” and national health systems (insert Canadian or British horror story here) that stifle innovation, encourage malingering, and ration care—either by forcing patients to wait or by pulling the plug.

This political history dramatically lowered the sights of policymakers. Since the 1970s, the notion of universalizing job-based coverage or displacing private insurers has been slowly replaced by a mantra of competition—marked by the rise of the HMO in the 1980s and the reign of “managed care” ever since. Recasting health care as a marketplace of individual coverage was the pet project of the right in the years before and after the Clinton health care debacle. The Heritage Foundation’s 2006 publication, “The Rationale for a Statewide Health Insurance Exchange,” enthusiastically compared state insurance exchanges to farmers’ markets or the used car clearinghouse CarMax. This was essentially the blueprint for Obamacare. The irony runs in the other direction as well. As Republicans insist on tarring an idea they came up with as the resurrection of Lenin, Democrats find themselves defending a policy they would have scoffed at a decade ago. Their defense depends on two, somewhat contradictory, strategies. One is to celebrate the transformation in health care by reminding Americans (especially the uninsured) that the ACA has made coverage easier to get and harder to lose. The other is to downplay that transformation by reassuring Americans (especially employers and the securely-insured) that the ACA will not affect them or their coverage. The truth lies somewhere in the middle.

The Promise of the Affordable Care Act

In terms of coverage, efficiency, and equity, the ACA is a far cry from a single-payer system. Some hope that it might push us along that path (either through its sheer failure or by incremental tinkering with its provisions), and some fear that it might block the way (by marginalizing the remaining uninsured or simply poisoning the well for future reformers). In either case, the ACA is better than nothing and it has already had a real impact. Health care costs are falling. While slower spending is largely attributable to a slow recovery from a long recession, it also reflects the rollout of some of the ACA’s cost-containment provisions and the response of private insurers to the threat (and now the reality) of modest health reform. And the uninsured are finding coverage. Thanks to the ACA’s requirement that insurers allow children to stay on their parents’ plan until they are twenty-six, the uninsured rate among young adults has fallen for two consecutive years. None of the economic calamity predicted (or pined for) by congressional Republicans has come to pass. The law actually imposes little obligation, cost, or uncertainty on employers. Ninety four percent of firms affected by the ACA’s employer mandate already provide coverage voluntarily. There is no empirical evidence that the ACA is a “job killer” or that employers are gaming the mandate (now pushed off to 2014 anyway) by ducking under the fifty-worker threshold or cutting workers back to part-time status. The promise for the future is substantial. The combination of insurance regulations and state exchanges provides coverage options for millions of uninsured Americans. Most of those finding insurance via the ACA will qualify for subsidies that reduce the costs of that coverage. And the ACA will enhance the health security of those who are already covered by checking the capriciousness of private insurers and providing a softer landing for those who lose a job or job-based coverage.

. . . And its Limits

But let’s not get ahead of ourselves. In the rush to defend the ACA (and the larger ideal of a robust public sector) against the GOP’s suicide caucus, we are smearing a lot of lipstick on a pretty ugly pig. This is a timid law that will likely show timid results in the long run. Real health reform–like that proposed in 1948, 1965, 1972, and 1992—demands that we confront three problems studiously avoided (and in some respects made worse) by the ACA.

1. The Folly of Job-based Coverage

At the root of our ongoing health crisis (both the unconscionable rate of uninsurance and a level of spending nearly double the OECD average) is our reliance on jobs as a means of distributing and paying for health coverage. This is an historical accident, which began as an ad hoc arrangement to evade Second World War-era wage and tax regulations by offering employees non-monetary compensation. After the war, the system stuck because the cost of health care was minimal, the prevalence of large-firm employment offered an easy way to spread the risk, and American firms did not yet face competition from countries where the health care costs and risks were socialized. We don’t live in this world anymore, but our health care system does. There is no good reason to let the distribution of jobs determine the distribution of a basic social good. This leaves many workers uninsured, burdens insured workers (for whom a decision to switch jobs, let alone to strike out on their own, exposes themselves and their families to the capricious risk-rating of private insurers), and penalizes responsible employers whose competitors (bottom-feeders in the United States, firms with socialized health costs abroad) faced no such costs.

And yet the ACA—like every “serious” reform proposal of the last generation—assumes job-based insurance as a baseline or norm and devotes its attention to those left behind (now nearly half the population). This is a little like moving furniture into a burning house. Job-based coverage is notoriously uneven, capricious, wasteful, and expensive. Between 2000 and 2012, the rate of job-based coverage fell 10 percent—pushing almost 14 million into either public coverage or the ranks of the uninsured. Mopping up around job-based coverage was a bad idea in 1965, when Medicare and Medicaid let private employers and insurers cherry-pick the good risks and dump the rest onto public programs. It was a bad idea in 1994, when the Clinton plan offered up a combination of debased private coverage and tepid universalism. And it is a worse idea today, when both the reach and the affordability of job-based coverage are in full retreat.

2. Laboratories of Indifference

The ACA’s second major flaw is its deference to the states on key aspects of eligibility and access. This policy choice too has a long and sordid history. In the formative years of the modern American welfare state, the federal government routinely deferred administrative details to the states. Uneven benefits and eligibility and the exclusion of broad occupational swaths (for example, domestic and agricultural workers) were effective concessions to southern Congressmen, who welcomed federal relief but also wanted to ensure that federal benefits would not upset the economic and racial order of Jim Crow. Much of the energy of the Great Society of the 1960s went into easing or erasing those regional disparities, either by tightening national standards or bypassing states altogether. But that tack didn’t last long and was followed by a tax-slashing, block-granting, benefit-cutting “new federalism” that continues to the present day. We see this in the starkly uneven provision of cash benefits. And we see it in the bizarre “we don’t want your money” politics of state unemployment insurance.

This same pattern is playing out in the ACA, which depends heavily on the willingness of states to support insurance exchanges and expand Medicaid coverage. Expanding Medicaid coverage to 133 percent of the poverty line is a key piece of the ACA’s coverage puzzle. But the Supreme Court decision that upheld the constitutionality of the act last fall also upheld the rights of states to opt out of the Medicare expansion. Despite the fact that the expansion will be paid for largely with federal dollars (full federal funding through 2016, no less than 90 percent after that), fully half of the states have passed on meaningful participation (twenty have turned the idea down flat and five more are undecided). Not surprisingly, the states that have thumbed their nose at the ACA are among the nation’s poorest and—with a midwestern inroad–closely follow the contours of the old Jim Crow South. According to a recent analysis by the New York Times, state-level recalcitrance will leave two-thirds of poor blacks, two-thirds of single mothers, and half of all uninsured low-wage workers ineligible for Medicaid and therefore unable to afford coverage offered by the insurance exchanges. This regional unevenness blunts the ACA’s impact by limiting its reach where is most needed. It leaves the fate of a federal law in the hands of fickle and deeply partisan state legislatures. And it means that health care provision, already fractured into tiers of coverage (conventional private coverage, leaner “exchange” offerings, and public programs), will also be divided into different tiers in every state.

3. The Actuarial Impulse

This brings us to the ACA’s third major flaw: its inability or unwillingness to displace private insurance. In this respect, one baseline assumption of health reform has remained unchanged since the 1930s: we already pay for national health insurance, we just don’t get any of the benefits. As a consequence of incremental timidity, we spend as many public dollars on health care as any of our democratic and industrialized peers. We then spend as much again in private dollars–for a per capita bill more than double the OECD average—and claim precious little (widespread insecurity, lousy health outcomes, and high costs) in return. The problem here is twofold. Despite the ACA’s efforts to regulate the worst of the risk-rating used by private insurers to exclude coverage, we continue to spend a lot of money just figuring out who is insured and how they are insured. In this respect, the ACA combines an expansion of existing public programs, an employer mandate (requiring some to cover workers and penalizing some who don’t), an individual mandate (requiring everyone to carry health insurance and penalizing those who don’t), a regulated health insurance exchange, and subsidies for employers and individuals who still can’t afford the ticket price. This complexity and fragmentation is deepened by the staggered and conditional rollout of the ACA’s key provisions (including the delay of the employer mandate and the push to delay the individual mandate) and by the uneven participation of states. “My head was spinning after our conversation,” noted one journalist determined to understand the workings of just the exchanges but bewildered by “the decision points, the trade-offs, the bureaucratic requirements, the mumbo-jumbo to comprehend.”

Second, any reform that simply lards new coverage options onto the old system of private insurance will be hard pressed to realize any real efficiencies or savings in the long haul. Propping up the current health care system—or pushing more people into it via individual or employer mandates—does nothing to address the administrative waste, actuarial complexity, or naked profiteering that created our health care crisis in the first place.

Colin Gordon is a professor of history at the University of Iowa. He writes widely on the history of American public policy. He is the author of Dead on Arrival: The Politics of Health Care in Twentieth Century America (Princeton 2004) and, most recently, Growing Apart: A Political History of American Inequality, published by the Institute for Policy Studies at www.inequality.org.