Last Tuesday, the Trump administration served up its proposed budget for 2018-2027. Over the next decade, it cuts total federal spending 2%, including reductions of $610 billion in Medicaid, $193 billion in the food stamp program, and numerous non-discretionary programs. It calls for increased spending for the military and veterans affairs programs, and assumes the economy will grow at a rate of 3% annually—above current levels—achieving a balanced budget by 2027.
Then Wednesday, the Congressional Budget Office released its analysis of the American Health Care Act (AHCA), the legislation passed 217-213 on May 4th by the House of Representatives to replace the Affordable Care Act. Per the CBO, the AHCA will result in 23 million losing their insurance coverage and reduce the federal deficit by $119 billion by 2026. Younger and heathier people would see their insurance premiums shrink because their plans would cover less while older and sicker would see spikes. Key elements in the AHCA include protections for those with pre-existing conditions who maintain continuous coverage, flexibility for states to define what constitutes qualified coverage, delegation of Medicaid oversight to states, suspension of the individual mandate to purchase coverage retroactive to 2016 and creation of the $130 billion Patient and State Stability Fund to accommodate high risk pools for those uninsurable. Cuts to Medicaid ($834 billion) and tax credits ($665 billion) that assist lower income individuals to purchase coverage in the marketplaces figure prominently in the AHCA’s math along with elimination of taxes on insurance companies, drug companies and high income individuals (above $200,000) who paid a Medicare surtax of .09%.
These two reports have much in common: Both reduce long-term deficits. Both assume the economy will grow as a result of policies that stimulate economic productivity. Neither makes major changes to Medicare and both cut Medicaid funding significantly. And they’re certain to prompt vigorous public debate going into the 2018 and 2020 election cycles.
I was at dinner with a group of healthcare investors, clinicians and entrepreneurs last week. The topic quickly turned to how all this is going to play out. None of the attendees was a politician. All had success in the private healthcare industry, and none expect it to survive. To a person, the consensus was that the toxic political climate that divides our country and uncontrolled spending in healthcare predestine the inevitability of a single payer system.
The discussion that followed was neither fatalistic nor remorseful. These industry vets dismissed the notion that fixing the individual insurance market so insurers would stay is the answer: they felt corrections could be made to stabilize it in short order if politicians put principle above politics. The more fundamental challenge, they believe, is the enormity of the challenge of regulating a system that’s loosely connected, self-protective, complicated and powerful politically. The status quo, they concede, is better for insiders, but there’s recognition the system’s self-indulgence might have reached its tipping point with the public. The concept of a single payer system seems to be gaining public support, they believe, even among those opposed to “big government”. While a single payer model has limitations, the consensus was it would create new opportunities for investors and entrepreneurs though the transition would be difficult.
They’re right. Public opinion is trending toward a single payer or some form of universal coverage. The majority believe healthcare coverage is a fundamental right and the federal government should play a bigger role in its provision, but most do not understand how the system operates nor believe it comprehensible. The majority think health costs are too high but rarely check prices or pursue cheaper courses of treatment. The majority believe the Affordable Care Act is flawed but prefer it be fixed rather than replaced. And while opinions are changing, the right path forward remains unclear to most (See Fact File).
There are strong views on both sides of the current debate about the future for our system: One view holds that hanging chads in the Affordable Care Act are harmful, healthcare-spending induced federal deficits threaten our fiscal sustainability, wastefulness in programs like Medicaid is systemic and unhealthy behaviors costing taxpayers unnecessarily are necessary foci for reform. They believe a private system with the right incentives and constraints is the remedy.
The other view holds that healthcare is a fundamental right, not a privilege. It posits that individuals have little control over their health and its costs, especially those in poverty or born with a serious medical problem. It sees our health care system ideally as a collection of universally accessible programs and services for which those of means pay. It sees close proximity between health and human services programs and considers health disparities a root cause of the system’s costliness.
Each demonizes the other: the right declares the fiscal incompetence of the left and romances its private market economic policies. The left cites growing economic disparity and the necessary role of federal government to bring equity and fairness to our society. Both see healthcare as the frontline in their philosophical warfare: it’s 30% of federal spending, a safety net program for one in six in our society but in many ways, out of control. Both acknowledge its wastefulness, estimated at $765 billion this year alone due to unnecessary administrative red tape, high prices and unnecessary overuse, but disagree on where to start. (ProPublica April 2017). The budgets proposed by the administration and House suggest Medicaid waste is high on their list, thus shifting pressure closer to home in states and communities.
There are flaws in the entrenched views on both sides: the system’s not perfect, it’s expensive and it’s not sustainable. It’s not a Republican or Democratic invention: it’s the evolution of a system that grew without thoughtful anticipation of changing clinical, social and economic realities.
Now the spotlight on Repeal and Replace turns to the Senate. Speculation is it might start from scratch, noting three in four polled oppose the AHCA due to its imbalance between cuts to the poorest (Medicaid, tax credits) and tax cuts to the wealthy and industry insiders. We’ll see.
Perhaps it’s time for partisans on both sides to press the pause button and start fresh. Perhaps it’s time to convene a constitutional convention to design the future of our health system. Perhaps it needs to include folks like my dinner companions: concerned observers of the system with open minds and keen interest in its sustainability. It’s too important to let politicians set its course. Let’s start a national conversation. It’s time for THE TALK.
My good friend, Jim Nathan, CEO of Lee Health in Ft. Myers FL, steps down after 40 years this week. Jim and I have exchanged countless articles and frequently compare notes about the future of the health system. Jim’s integrity, energy, vision and character inspire me and countless others to ask the tough questions and reflect on the future. Jim’s stepping aside but not stepping away. He cares about the future of our system.
Fact File: Recent Polls about U.S. Health Reform
- 54% of US adults have an overall positive view of the healthcare industry vs. 34% have a negative view (Gallup 2016).
- 46% of those who identify with the Republican party are in favor of "expanding Medicare to provide health insurance to every American" vs. 38% opposed (Economist/You Gov).
- 33% of adults want to repeal the ACA, 30% want to keep some parts of it and change others, and 26% want to keep it as is. “These attitudes have barely budged since the law was passed. The biggest change has been an increase from 21% to 30% of those who want to keep some parts of the law and change others” (The Harris Poll August 12-17, 2015).
- 63% of people favor a universal health care system vs. 21% opposed. Proponents include 33% Republican, 87% Democrat and 61% independent. “In addition, an overwhelming 84% to 16% majority believes that having a system that ensures that sick people get the care they need is a moral issue. That includes 75% of Republicans and 91% of Democrats” (The Harris Poll August 12-17, 2015).
- 44% of voters said they support a system where “all Americans would get their health insurance from one government plan,” vs. 36% opposed. "Americans who voted for President Donald Trump are split on a single-payer system, 37% of Trump voters said they support the idea vs. 48% opposed” (Morning Consult/POLITICO poll April 12, 2017).
- “Universal health coverage from the government is backed by more than half of Democrats (54%), while independent voters are split on the idea, with 42% in favor vs. 33% opposed” (Morning Consult/POLITICO poll April 12, 2017).
- 17% of Americans support the American Health Care Act vs. 56% opposed. “Even among Republicans, backing for the plan is lukewarm: 41% say they back the plan, while 24% oppose it. The proposal also draws more disapproval thanapproval from groups who were key to Trump's election: whites with no college degree, seniors and white men” (Quinnipiac University Poll March 2017).
- 46% of Republicans favor "expanding Medicare to provide health insurance to every American" vs. 38% opposed (Economist/YouGov April 6, 2017).