Despite rumors of a revolution among a small group of Democrats seeking to derail it, Nancy Pelosi appears to be on track to be re-elected as House Speaker when the House reconvenes in January. I am no fan of Nancy Pelosi’s in part because if there is any single individual who can be credited with the passage of Obamacare in 2010, it is she. At the end of the day, when the chips were down in early 2010, she appears to have been the deciding factor in giving President Obama the spine to go for broke rather than follow the counsel of senior White House advisors such as Rahm Emanuel to settle for a less ambitious bill .
According to the New York Times, the Democrats “won a mandate on health care” in the November elections. As Nancy Pelosi herself put it: “health care was on the ballot, and health care won.” So what will Nancy Pelosi do now once she is back in the Speaker’s chair?
In light of Judge Reed O’Connor’s recent ruling that Obamacare is unconstitutional and that the entire law must be scrapped, there is likely to be strong pressure to pass some sort of legislation to improve protections for people with pre-existing conditions. And there are various proposals on the table to tinker with Obamacare to make it even better:
- Restoration of payments to insurers to offset cost-sharing reductions for low-income Obamacare enrollees (terminated by President Trump in October 2017).
- Restoration of funds to pay for insurance counselors and enrollment assistance to encourage greater enrollment in Obamacare (cut 84% by President Trump).
- Federal payments to states to help them subsidize the largest medical claims, thereby reducing premiums in general.
- Congressional investigation of ways in which the administration purportedly has “sabatoged” Obamacare.
- Congressional investigation of work requirements imposed on Medicaid beneficiaries in several states.
Of course, Rep. Pelosi also will face pressure from those who want to resurrect the idea of a public option–an idea she supported during the fierce debates of 2009-2010, but which foundered for lack of votes in the race to the finish line. And with various progressives jockeying for position in the 2020 race, there likewise will be a vocal minority urging a push for Medicare for All. To her credit, Rep. Pelosi has wisely desisted from endorsing that singularly bad idea.
But it would be a shame if Nancy Pelosi squandered this opportunity by merely re-arranging deck chairs on the Titanic. By now it is manifestly clear that Obamacare–like so many ambitious government programs before it–has massively overpromised and underdelivered.
- High Costs. Waste constituted 35-37% of health consumption expenditures in 2009. There is no evidence Obamacare has reduced this. Indeed a recent study from the Washington State systematically examined claims from 2015-2016 using Milliman’s Health Waste Calculator and determined that 32.9% of the spending examined was wasteful, with another 3.1% deemed “likely wasteful.” And Gallup reports that the percentage of Americans dissatisfied with health care costs is higher today than it was when Barack Obama took office (79% vs. 72%).
- Barriers to Access. To be sure, Obamacare reduced the number of uninsured, but by 27% less than originally promised. Why? The Health Exchanges missed their expected enrollment targets by 43% while Medicaid enrollment was 24% below expectations . And notwithstanding the reduction in the number of uninsured, the overall share of Americans who report delaying care due to costs is the same in 2018 (29%) as it was when Barack Obama took office.
- Poor Health Outcomes. The most widely optimistic champions of Obamacare used a lot of statistical truth-twisting to predict that Obamacare would save tens of thousands of lives every year. They repeatedly bashed the American health system for spending so much to achieve vastly worse health outcomes than our international competitors. In actual fact, the U.S. has seen life expectancy decline over the three years in 2014, the very year that Obamacare’s expansion in coverage began in earnest . Even the Washington Post concedes this is a “dismal trend not seen since World War I.” I myself am quite dubious about using life expectancy as a measure of health system performance, but we have more concrete evidence of Obamacare’s adverse unintended consequences. A brand new study led by Harvard researchers showed that Obamacare’s Hospital Readmissions Reduction Program “may have resulted in 10,000 more deaths among patients with heart failure and pneumonia.” The authors sensibly conclude: “before we are seduced by promising but untried ideas, we need to first demand robust evidence that they will not harm patients.”
The Health Care Choices Proposal is A Great Improvement Over Obamacare
Although Republicans have been falsely accused for years of not having an Obamacare replacement plan, in actual fact there is a very sensible replacement plan that ought to command serious attention to anyone such as Nancy Pelosi who claims to make evidence-based policy decisions.
Instead, I would like to just focus on the major impacts of this proposal as recently estimated by the Center for Health and Economy:
For those who prefer words:
- Premium Impact: The Proposal is projected to decrease the cost of premiums for private individual market health insurance coverage. Silver plans would see the largest impact, as premiums would decrease by 15 to 32 percent beginning in 2020 relative to the baseline.
- Coverage Impact: The Proposal is projected to result in nearly 1 million fewer people purchasing insurance by 2028, with enrollment holding steady earlier in the 10-year window.
- Medical Productivity Index: The Proposal would lead to a 12 percent increase in the medical productivity index by 2028.
- Provider Access Index: The Proposal would lead to a 20 percent decrease in the provider access index by 2028.
- Budget Impact: When the H&E baseline is used to determine the yearly block grant, the Proposal would decrease federal spending by $ 22 billion from 2020 to 2028.
In short, this plan is a considerable improvement over Obamacare delivering nearly identical levels of coverage but at a greatly reduced cost to individuals buying their coverage in the non-group market and to American taxpayers.
Why Are There Any Adverse Impacts?
It is worth discussing the two apparently adverse impacts of this replacement plan.
Reductions in Coverage. First, there is a minuscule reduction in coverage, driven entirely by modest reductions in Medicaid enrollments (nearly all of this decline is offset by corresponding increases in the non-group market). The reason Medicaid enrollment declines is because the proposal sensibility eliminates the enhanced federal match for Medicaid expansion and instead gives states block grants that completely eliminate the very perverse incentives created by the enhanced federal match.
To understand why, consider what you might put into your shopping card if you were offered an open-ended 90% discount on whatever you bought versus being given a coupon for a fixed dollar amount that you could use to deduct from the cost of all you bought that day. The open-ended discount would incent you to put all sorts of things into your shopping card that you didn’t particularly need or ever would buy if you had to pay for them entirely from your own funds. But “other peoples’ money”? That’s quite a different kettle of fish. At the margin, you could be tossing in things costing a dollar but worth only 11 cents to you. What a huge waste of money!
The fact that Medicaid enrollment declines under this proposal is merely a reflection of the perverse incentives for states to do things they would not otherwise do. While it is regrettable that there might be nearly 1 million who became uninsured as a consequence of these decisions by states to hold their Medicaid spending in check, providing care for these individuals is not likely to strain our current safety net or providers willing to slightly increase the amount of uncompensated care they provide. And the hard truth is that if you ask the people in the non-group market whether they’d be willing to forgo their 24 to 32% premium savings to avert this outcome, most would be likely to say “no.” Taxpayers likely also would be reluctant to forego $ 22 billion in savings by sticking instead with Obamacare to keep such individuals enrolled in coverage.
Reductions in Provider Access Index. The most succinct explanation of this comes from H&E itself: “H&E expects the provider access index to decrease as a result of the regulation changes. Many consumers would switch to catastrophic and STLDI plans, which have a lower actuarial value. The higher cost sharing of lower actuarial value plans means that consumers have less incentive to access health care. Both of these characteristics lead to a lower provider access index, broadly defined as the ability (due to cost or other insurance-driven factors) of patients to seek out desired doctors and specialists.”
In short, this is happening due to a completely voluntary trade-off being made by consumers. They essentially are trading off sizable premium savings in exchange for plans that have higher cost-sharing and/or more limited plan networks (read HMOs or PPOs with narrow provider networks). The latter is nearly identical to what happened in the 1990’s during the “managed care revolution.” As Alain Enthoven demonstrated decades ago, when consumers are given a fixed dollar amount to purchase coverage, they are more than happy to enroll in vertically integrated managed care plans that offer them the best value for the money.
It likewise is consistent with the rising popularity of Medicare Advantage plans: even though traditional Medicare offers open-ended access to every doctor in the country who takes Medicare, more than one third of Medicare beneficiaries (including myself) have happily traded away that open-ended access in favor of a plan with a narrower network of providers that is so efficient that it can offer a dizzying array of enhanced benefits (including Part D coverage) at a very low or in some cases zero premium cost.
And for those who end up in catastrophic health plans, we already know from the RAND Health Insurance Experiment that the observed reduction in health care utilization and spending we observe among those with catastrophic coverage produces no corresponding adverse effects on health outcomes, including mortality risk.
Conclusion: Does Nancy Pelosi Have the Will to Fix Obamacare?
Given Nancy Pelosi’s past track record, I have no doubt whatsoever about her ability to secure a majority of votes on both sides of the aisle for this eminently sensible replacement plan. Will there be purist progressives who oppose this plan on grounds that replacing Obamacare will put a major roadblock in their dream of Medicare for All? Of course. Likewise, will there be purist conservatives who oppose this plan because it similarly might dissipate enthusiasm for more radical steps in the direction of their preferred market-oriented health reform? To be sure.
But leaving aside these two groups, it would be astonishing if Nancy Pelosi could not garner 218 votes for passage–likely many more–since she would have both sides of the aisle to work with. The only residual question is whether Nancy Pelosi has the will for sensible health reform.
READ CHRIS’ BOOK, The American Health Economy Illustrated (AEI Press, 2012), available at Amazon and other major retailers or as a pdf at AEI. With generous support from the National Research Initiative at the American Enterprise Institute , an online version complete with downloadable Powerpoint slides and companion spreadsheets has been made available through the Medical Industry Institute’s Open Education Hub at the University of Minnesota.
INVESTORS’ NOTE : The biggest publicly-traded players in Obamacare’s health insurance exchanges are Aetna AET -0.28% (NYSE: AET ), Humana HUM -0.78% (NYSE: HUM), Cigna CI -0.25% (NYSE: CI ), Molina (NYSE: MOH ), WellPoint (NYSE: WLP ), and Centene CNC -2.15%(NYSE: CNC ), in order of the number of uninsured exchange-eligible Americans for whom their plans are available.
 In the words of Ron Pollack, executive director of Families USA, a lobbying group deeply involved in Obamacare’s passage: “If Nancy Pelosi had not been the House Speaker in the 111th Congress, the Affordable Care Act would never have been enacted because Pelosi, time and again, made the difference in getting the law passed.”
 Sharp-eyed readers will note that I am relying on 2016 data to support these claims. That is to avoid accusations that I have stacked the decks by looking at figures after President Trump purportedly began “sabotaging” the law. In reality, despite his best efforts to unravel the law, the decline in Exchange enrollment between 2016 and 2017 (less than 400,000) was virtually identical to the decline in enrollments between 2015 and 2016. And the enrollment decline in enrollment this year is virtually identical to last year’s. In short, the Exchanges were struggling well before Donald Trump took office and have continued to decline at about the same pace.
 Life expectancy was 78.9 years in 2014, declining to 78.7 in 2015 (Table 4). Although it originally was estimated to have declined another 0.1 years by 2016 (Table 4), final figures published by CDC show that actual life expectancy for 2016 remained stable at 78.7. However, in 2017, life expectancy declined another 0.1 years.