In the wake of what so many have called an “historic election,” I’m refreshing (or at least dusting off) my understanding of US political history. Beyond improving my own erudition, I’m trying to help our clients and our professionals consider how overarching political developments and historical trends might shape strategies and efforts to repeal and replace the Affordable Care Act (ACA).
So, I’ve been reading both the old-fashioned way, with actual printed books, and going down lots of fascinating internet rabbit holes. The more that I contemplate how broad historical currents might intersect with the current political moment, the more I think we should reframe our views of how the ACA might be repealed and replaced.
My overarching perspective is that the federalism pendulum is beginning to swing once again away from centralized power in Washington, DC and toward states’ rights and responsibilities. And that this shift will likely correlate with related political and policy trends, such as the primacy of legislative action over executive branch regulations and preferences for competitive market-based approaches rather than government-driven solutions.
If this perspective holds true, many health care industry leaders will likely need to adjust the lenses through which they view potential ACA replacements. Rather than a massive “Trumpcare” statute or other comprehensive federal program to supersede “Obamacare,” the 115th Congress and the incoming Administration may instead seek to devolve many of the ACA-defined federal roles in insurance coverage, financing, and market regulation to the states and the private sector. Many of the proposals floated to date as possible ACA replacements emphasize state-level models and flexibility, with provisions such as Medicaid block grants, no federal coverage mandates, state high-risk pools, and state-defined benefit package requirements.
The governing philosophy underlying such a “repeal-and-devolve” approach seems clear. However, the legislative, political, budgetary, and technical hurdles to achieving this vision should not be underestimated. And while many of us are focused on the federal challenges inherent in the repeal-and-replace efforts, there are concomitant issues and uncertainties in every state capital.
Accordingly, we’ve been studying ACA impacts across state markets, which would assume a higher level of significance under several of the congressional ACA replacement proposals. Our ACA Baseline Index, which is outlined below, is a simplified output of a model that compares ACA “facts on the ground” in five measures:
- Gains in insurance coverage (2015 vs. 2013)
- New federal subsidies per state resident, a combination of enhanced funding for the Medicaid expansion population (2015) and ACA exchange premium tax credits (2016)
- Reduced hospital uncompensated costs per state resident (2015 vs. 2013)
- Health plan exposure per exchange enrollee, reflecting a key metric of ACA insurer financial condition: risk corridor payments owed to plans but unpaid by the federal government (2014 plus 2015)
- ACA premium inflation, reflecting the year-over-year price increase of the second-lowest-cost silver product (2017 vs. 2016)
ACA Baseline Index, 2016: Illustrative model output
In this index, Oregon is the state with the highest combined impact from the ACA across the five selected measures. The state experienced among the largest gains in the share of its population with health insurance; ranked first among the 50 states and the District of Columbia in new federal payments per capita for expanded Medicaid coverage and ACA premium subsidies; experienced among the largest reductions in hospital uncompensated care costs; ranked high in our measure of ACA health plan financial challenges; and experienced 2017 ACA average premium increases that were the 24th highest nationwide.
Prior to the ACA, Massachusetts implemented its own state-level reforms (including the program sometimes referred to as “Romneycare”). As a result, MA ranked 51st in terms of the incremental gain in coverage after the implementation of the ACA, as the uninsured rate was already very low.
Our analysis demonstrates that the ACA has reshaped the terrain of US health care in some important ways—but that the nature and extent of these changes vary significantly among the states. Some of the variation can be explained straightforwardly, by whether and how states chose to expand their Medicaid programs and take advantage of ACA financial incentives. Additional layers of complexity also underlie and explain state market variation.
It’s too early in the ACA repeal-and-replace effort to predict the approach, much less the outcome. But it’s quite possible that “repeal-and-replace” might eventually be more accurately described as “repeal-and-devolve.” The sort of state market variation reflected in our ACA Baseline Index might become even more pronounced and distinctive if indeed federal-level market intervention recedes and state discretion and local market dynamics gain more prominence.
The metaphor of the “patchwork quilt” has long been used to describe how the national Medicaid program is really a stitched-together construct of unique, state-level programs and exchanges. In a different but related context, “laboratories of democracy” was a metaphor used by US Supreme Court Justice Louis Brandeis in the early 20th Century to describe how states can and should act as public policy innovators under his vision of federalism.
My take: The patchwork quilt and laboratories of democracy concepts seem very relevant to how ACA repeal-and-devolve scenarios might develop over the coming months and years.
Insurance coverage gains: US Census Bureau, American Community Survey
New federal subsides per capita: CMS Medicaid Benefit Expenditure System, Kaiser Family Foundation Analysis of Effectuated Enrollment Snapshot, US Census
Hospital uncompensated care: American Hospital Association, US Census
ACA health plan exposure per enrollee: CMS, Kaiser Family Foundation
ACA premium inflation: Kaiser Family Foundation Analysis of Healthcare.gov and state insurer rate filings