The way forward on health care

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The way forward on health care

Matthew Yglesias

10 - 13 minutes

After being a bit provocative in Tuesday’s post by saying the U.S. health care system has some unappreciated virtues, I want to loop back to my very normal lib opinion that the enormous number of uninsured people in the United States is a huge problem.

Indeed, I think Democrats have erred by placing less emphasis on this issue after saving the Affordable Care Act, a big political success for them in the 2018 election cycle. Polling from Gallup shows that a substantial majority of Americans believe that making sure everyone has health insurance should be the government’s responsibility, and Democrats have a consistent trust edge on health care. It’s bad when the health care conversation gets hijacked by activists demanding Democrats run on a Medicare for All platform, because giant tax increases and big changes to the status quo scare voters. But Democrats shouldn’t abandon the issue. The high-level M4A pitch that “health care should be a right” polls well as an abstraction, and the trick is to roll out incremental proposals that embed that value in a non-threatening way.

I believe that means first and foremost Medicaid expansion, the big unfinished business of the fight for the Affordable Care Act.

Our story starts with the weird tale of Medicaid expansion and the Affordable Care Act.

In its initial conception, Medicaid was not supposed to be a major element of the ACA. The bill’s designers really wanted to do a bipartisan bill with lots of industry support, which led to the much-discussed three-legged stool of regulatory reform, subsidy, and mandatory purchase of private insurance. But while the ACA’s architects often said they were inspired by the Dutch and Swiss systems, those systems have a crucial fourth leg — price controls — which are also used in the Singaporean system that conservatives often claim to admire. Without price controls, American health insurance is very expensive, and subsidizing it for poor people requires a lot of federal spending. Medicaid, by contrast, relies on the federal government’s massive purchasing power to obtain health care services at sub-market prices.

In other words, giving people Medicaid turns out, in most cases, to be cheaper than subsidizing the purchase of private insurance.

And because the same centrist Democrats who preferred a market-based approach also favored a deficit-reducing approach and also were skeptical of tax increases, the ACA ended up relying more and more on Medicaid expansion and less and less on the three-legged stool to drive coverage expansion. Democrats also got cold feet about imposing really tough penalties on people for non-purchase of health insurance, so the individual mandate was relatively weak and ineffectual. And because it was also very unpopular, repealing this piece of the ACA was doable for Republicans, leaving the three-legged stool with only two legs.

The upshot of this is that in terms of reducing uninsurance, the ACA was mostly a Medicaid expansion law, even though almost all of the discourse focused on the insurance exchanges.

Things were further complicated by the Supreme Court, where Justice Kagan and Chief Justice Roberts seem to have struck a deal to resolve the ACA litigation. Kagan agreed to join Roberts and the conservatives in a ruling which held that Congress’ effort to force states to expand Medicaid violated alleged federalism provisions of the constitution.1 In exchange, Roberts upheld the individual mandate. This was a totally Pyrrhic victory for Democrats who would’ve been better off with the court making the opposite trade.

The result is that many states, mostly in the South but also in Wisconsin and a few others, haven’t expanded Medicaid. Getting them to do it is the biggest and most important thing we can do to tackle uninsurance.

The best way to accomplish this by far is for Democrats to run and win “narrow target” pro-Medicaid campaigns in red areas.

That means that in a state like South Carolina, Democrats would run someone for governor who is more progressive than her opponent in the sense that she supports expanding Medicaid, but is probably way more conservative than your average Democrat on a number of other important issues. The proof of concept for this is John Bel Edwards who ran and won in Louisiana on Medicaid expansion, delivered health insurance to hundreds of thousands of low-income Louisianans, and is also pro-gun and anti-abortion.

For many progressives, this is — understandably — a hard pill to swallow. But it’s important to acknowledge that running a pro-choice candidate in Louisiana would have done nothing to protect abortion rights. Unlike in the Midwest where abortion outperforms generic partisanship, abortion rights in the Deep South are even less popular than the Democratic Party due to the presence of a reasonably large number of anti-abortion Black Democrats. But Edwards winning has given low-income women in his state access to contraceptives, obstetric care, and other health services.

There really isn’t any other great way to achieve expansion.

Raphael Warnock and Jon Ossoff promoted a Build Back Better provision that would have basically given an even bigger boatload of money to non-expansion states to cover the Medicaid-eligible people in the exchanges. That’s a good deal for Georgia, and in the context of what Democrats were originally hoping would be a $4 trillion spending package, it’s a pretty trivial amount of money. But given realistic fiscal constraints, it’s always going to be difficult for a sweetheart fiscal deal for red states to make it onto a Democratic priority list.

A superficially more plausible approach might be to find creative new ways to punish non-expansion states. But the Supreme Court might toss that. And a huge share of the victims of such punishment would likely be Black Democrats who didn’t vote for the anti-expansion Republicans in the first place. So Democrats need to win the races, either by running conservative pro-Medicaid Democrats or else by ditching the Democratic brand altogether and running independents on a pro-Medicaid platform. It’s not that there’s nothing useful the federal government could do, but it would probably have to be bigger.

In the context of the insane 2020 Democratic Party presidential primary, the following was considered a moderate proposal:

    Create a new “public option” for health insurance with payment rates linked to Medicare.

    Automatically enroll all newly born kids in the public option.

    Allow people who purchase health insurance on the ACA exchanges to access this public option.

    Allow companies to use the public option as their insurance provider.

This proposal is actually a sweeping change to the American health care system that was only coded as moderate because of the bizarre nature of that primary. Leftists pretended it was small time because it wasn’t Bernie Sanders’ proposal, and moderates who praised this idea when they were trying to beat Bernie Sanders in a primary forgot all about it the moment it served its purpose.

But it’s actually a good idea that left-wing Democrats should take up.

Notwithstanding the specific dynamics of the 2020 primary, it really lands in their sweet spot of taking on corporate interests (insurance companies and hospitals hate this idea) without involving politically toxic broad tax increases on the middle class. And while I don’t see any short-term prospect for getting to 50 votes with this idea, it’s a good framework for thinking about next-step reforms to the health care system. You want to try to get the payment rates for Medicaid up to the higher Medicare levels so that more providers are willing to see Medicare patients. You want to try to get the payment rates for ACA exchange plans down to the lower Medicare levels so they are less costly and you can make the premiums cheaper for patients without increasing the subsidy level. And then you want to create the possibility for employers to get out of the insurance underwriting business and simply write a check to the government so their workers get health care.

This is more likely to take the form of multiple reforms — or perhaps state-led initiatives in the more progressive states — than a single Big Bang. But the basic vision of “Medicare for More People Than Have It Now” as a series of steps toward the goal of an M4A-type system deserves more thought and support.

Then the flip side of the coin is that we need to dismantle regulatory barriers to the supply of health care.

So far we’ve been talking about lefty-type stuff — expanding and deepening public provision of health insurance.

But there are also lots of important neoliberal-type reforms we should be making to the health care system. The United States has fewer doctors per capita than Canada or any European country, largely because Congress capped the number of residency slots years ago in a misguided effort to save money. That whole exercise exemplifies why I’ve never loved the rhetoric of “health care costs.” The idea was that creating a scarcity of doctors would help contain Medicare costs because the government can’t pay for a doctor visit that doesn’t happen.

This kind of penny-wise, pound-foolish behavior has been with us for a long time. Over 40 years ago, my uncle wrote a book called “Controlling Hospital Costs: The Role of Government Regulation.” This is largely about the fashionable-in-the-1970s idea that states could reduce hospital spending by adopting Certificate of Need (CON) regulations that stopped the opening of unnecessary hospitals.

The problem here, as with the doctors, is that while creating artificial scarcity may reduce aggregate spending, it also generates higher prices.

Our system is unfortunately full of this kind of nonsense: rules that make it hard for foreign-trained doctors to move here and practice, rules that make it hard for dental hygienists to clean teeth without the supervision of a dentist, rules that unnecessarily restrict what a nurse practitioner or a pharmacist can do without the supervision of an MD, rules that unnecessarily restrict the cross-state provision of telehealth. And we ought to be working to tear it all down. Moves to reduce the price of health care services are a good idea, but we shouldn’t be trying to constrain the quantity of services consumed out of a misguided idea that spending is per se bad. It’s good for people to get health care, and we should be facilitating that both on the regulatory side and on the insurance side.

I don’t think expanding the public option or tackling supply-side reforms should be an either/or choice, and I would advocate for both options. But realistically, the legislative coalitions for the two paths look pretty different. Either approach could work, though, and would be worth pursuing. Ultimately, the goal should be to reduce people’s financial downside from getting sick and seeking care (this is what insurance is for) while also trying to improve health care by unleashing more abundance of health care services.