Another Round of Health Reform Is on the Way

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Commentary on Health Care Opinion Leaders' Views on Health Reform, Implementation, and Post-Reform Priorities by Michael Leavitt, former governor of Utah and U.S. Secretary of Health and Human Services under President George W. Bush

Michael O. LeavittWhile I have profound disagreement with what President Obama and the Democratic congressional leadership did with passage of the Patient Protection and Affordable Care Act (PPACA), their moment of jubilance is understandable. It was a significant legislative accomplishment.

I, too, advocated large-scale reform of our nation's health care sector. Were the outcome mine to choose, however, reform would have focused on the real problem—cost. Solving the cost problem paves the way for expansion of insurance coverage to follow.

Advocates of the new law say that once everybody is insured, we can begin dealing with the cost of care. Count me as skeptical on this one. Their assumed 10-year estimates suggest that half the funds needed for health reform will be secured by reducing Medicare growth by a half-trillion dollars. This will not happen—it never does. I have personal experience in this category. As secretary of the Department of Health and Human Services, I annually delivered budgets to Congress that contained a mere fraction of the Medicare reductions that this law now demands. These proposals were met with vehement opposition from members of Congress, including claims that I lacked compassion and commonsense. If a Democratically controlled Congress wasn't willing to make the hard decisions when the cuts were much smaller, why would the outcome be different now?

Here is the reality. Half the funding for the health reform bill will come from new taxes, and the rest will be added to the national credit card for the next generation to pay. The buy-today, pay-tomorrow mentality is a time-honored congressional tradition, especially when it comes to health entitlements. Putting it on the next generation's credit card is an all-too-familiar scenario.

I agree that preexisting conditions should be eliminated from the issuance of health insurance. However, there are smarter ways to do it. PPACA will produce unintended consequences galore. Actually, I'm not sure the consequences are unintended: it may be more accurate to call them undiscussed consequences.

With the combination of preexisting conditions, medical-loss ratio, community rating, and weak individual mandates, the health reform bill has guaranteed an exit of capital from the health insurance business. Their legislative language, in combination with the populist rhetoric against anything resembling capitalism, causes me to wonder if there was anything unintended about it. PPACA was drafted by legislators who openly advocate the government becoming the insurance system, and if the bill is implemented as passed, they will succeed.

Another aspiration I share with drafters of the health reform bill is for every American to have access to affordable insurance. However, the new legislation contemplates a different role for government than I envision.

Government's role should be limited to organizing, not owning the health care system. Within days of the bill passage, America's largest employers began announcing substantial reductions in earnings because of the hidden costs. Ultimately, those reductions mean one thing, fewer jobs. In aggregate, PPACA is a massive private-sector competitiveness killer. It is sadly ironic that it passed during the same month the President declared a new jobs bill as a desperately needed boost to our economy.

Seizing on the public outcry over high costs and one-sided process, Republicans have launched a crusade for repeal. And I predict over the next several years, parts of PPACA will be repealed or substantially modified. However, modifications will likely not come through a partisan political prowess alone. Even though passage did not have bipartisan support, after the economic impact becomes evident the modification of major portions will become quite bipartisan.

The next phase of the health care reform debate will start as various bill provisions create significant consumer (read voter) discontent. Following are a few examples:

  • Insurance companies will begin to implement the preexisting conditions provisions in the new law. When that happens, insurance premiums will rise…dramatically. This will be especially true for younger, healthier families who make an average or above-average income. This will be just as true in the exchanges as it will be in the plans managed by the Office of Personnel Management.
  • Medicare and Medicaid reimbursement rates to providers will not keep pace with inflation. Health care providers will attempt to do more procedures to maintain their income. Ultimately, an increasing number of doctors will decide to deal with only private-pay patients and hospitals will turn to government for larger subsidies. For a Medicare or Medicaid patient, the impact is predictable: getting an appointment will be harder. This trend has existed for years, but as it worsens, the political firestorm it creates will provide an opportunity for change.
  • State budgets will increasingly be eroded by lower revenues and higher Medicaid costs. State revenue estimates for 2010 are lower in 41 states than projected. As difficult as 2009 and 2010 have been on states, many foresee the 2011 fiscal year to be the worst yet. Washington just has not been listening. More federal money is not the long-term solution when structural reforms to Medicaid are needed. State legislators will be forced to underfund education, feed the Medicaid beast, or face taxpayer revolts. Health reform will again be on the agenda.

More than ever, America is facing an expanding deficit. We will face either inflation or higher taxes as Congress struggles to meet obligations. Either reduces American competitiveness in a global market. Once again, a loss of jobs will be the effect of this legislation.

As the consequences of this health reform bill unfold, real solutions will require sacrifice and realism. It will require Americans to eat better, exercise more, and to avoid behaviors that drive up health care costs. It will require that all of us become savvier health care consumers. We will have to change how care is financed and how services are reimbursed.

Every generation of Americans has faced a challenge that has earned them the privilege of living in the most prosperous nation on earth. Some generations have faced world wars, others depression, and still others endured both. Finding real solutions to the imbalance between our appetite for health care and our ability to pay for it may be the challenge of this generation.

Publication Details

Publication Date:
April 5, 2010
Authors:
Michael Leavitt
Citation:
M. Leavitt, Another Round of Health Reform Is on the Way, Modern Healthcare and The Commonwealth Fund, April 2010.