The Trillion Dollar Revolution

INTRODUCTION

Ezekiel J. Emanuel and Abbe R. Gluck

The Affordable Care Act (ACA) is arguably the most important health care legislation in US history—but it is much more than that.

The ACA has reached far beyond health care and into the corners of American politics, law, and the economy as well. It profoundly influenced our elections. Opposition to the ACA galvanized the Republicans and helped them recapture the House in 2010. But after multiple failed repeal efforts, the ACA then helped the Democrats take the House back in 2018.

The law has been subject to continuous litigation since the moment it passed. It has gone to the Supreme Court 5 times thus far and set new constitutional precedents on the reach of Congress’s power. It also has yielded important lessons about how American laws are implemented, including how much federal law can or should rely on states or the private market.

At the same time, the ACA has transformed the health care economy. It has fostered dramatic health care market consolidation, upended the way the insurance industry does business, and helped to change the daily practice of medicine and how services are paid for. It is a $1 trillion investment in universal coverage, delivery reform, and cost containment, only part of which has been successful thus far. But it also has allowed millions of new Americans to obtain insurance and measurably improved the population’s health.

Perhaps most fundamentally, the ACA seems to have shifted the baseline of what Americans understand to be the goals of their health care system. Ten years into the ACA’s lifespan, an alternative that would undo a substantial part of the law’s coverage gains no longer appears acceptable to the public. In thus changing our expectations, the ACA has paved the way for future health reforms that may extend even farther.

So is the ACA a “big fu@&ing deal” or “a broken mess”? Is it neither? Or both?

The ACA is much more ambitious than its comparable predecessor acts. Its most obvious predecessors—the Medicare and Medicaid legislation of 1965—were laws that expanded health coverage to two specific populations: the elderly and certain categories of low-income individuals. Those statutes never aspired to universal coverage—a health care system that would provide access to all Americans—rich and poor, old and young, employed or not, healthy or sick. Nor did they make fundamental changes to private health insurance or attempt to control costs or improve quality.

In contrast, the ACA targets every part of the health care system. Paradoxically, it makes these sweeping changes through an incremental strategy—a strategy that the politics of the moment required. The ACA does not wipe the slate clean or eliminate the private health care system, but instead it builds on what came before. For better or perhaps for worse, the ACA accepts the sprawling and fragmented complexity of the US health care system but seeks to make it more inclusive, more generous, more effective, and less expensive.

To say these changes are controversial is a massive understatement. The ACA has been the most attacked and—as it turned out—the most resilient piece of social welfare legislation Congress has ever passed. The law was challenged in court minutes after it was enacted and then partially gutted by the Supreme Court before its main provisions even took effect. The challenges continue to come—both in the courts and from a presidential administration that considers the ACA a “broken mess” in need of abolition. The very states that asked to implement the ACA rebelled against it from the start. Congress has tried more than 60 times to repeal it. But the law has survived—and gained in popularity in the process.

Ten years in, it is time for a critical analysis of the ACA. The authors of the essays in this volume examine the ACA’s goals and its arc of policy and politics. They look at the legal battles the ACA survived and how these battles changed American law. They examine the ACA’s impact on the health care system and economy and consider how its decade in existence will influence the health care agenda for the 2020s.

Enactment

During the 2008 presidential primaries and election, health care was a major issue, maybe second only to—and intertwined with—the economic recovery from the Great Recession. The election seemed to confirm the nation’s desire for health care reform. Barack Obama was elected by a 52.9% to 45.7% margin over John McCain, and Democrats picked up 21 seats in the House and secured (with independents) a filibuster-proof 60 votes in the Senate. Obama put health care at the top of his agenda, overruling members of his team who thought he needed to focus first on Wall Street, and he created the first-ever position of White House health care czar.

Any piece of major legislation contains policy tradeoffs and political ramifications. On policy, there were many choices and many things that could not be achieved even within the Democratic Party. There were also sharp memories of President Clinton’s failed attempt at health reform in 1993–1994 and a determination not to repeat previous mistakes.

Ultimately, an incremental approach won the day. The fragmentation of the health care system between varied public programs and private insurance companies would not be swept away and a new system built from the ground up. Coverage would remain split among the different insurance programs but would be expanded in every existing category: Medicaid would be converted from a program that covered only certain categories of people (like pregnant women) to an income-linked entitlement for all lower-income Americans; Medicare saw expanded benefits, particularly in preventative care and pharmaceutical payment; the employer-sponsored health care system (which at the time covered 50% of Americans), with the tax exclusion that supports it, was retained with additional consumer protections and benefits; uninsured Americans—those with incomes from 100% to 400% of the federal poverty level (just over $100,000 for a family of 4)—were to receive subsidies to help them buy private insurance in newly created marketplaces.

There were also two fateful decisions made about the structure of the insurance marketplaces. In an effort to appeal to Republicans, the Senate made the insurance marketplaces state based rather than, as the House wanted, national. This added to the ACA’s administrative complexity—but ultimately it was not sufficient in itself to attract the votes of any Republican senators. Similarly, in an effort to appease conservative Democrats, especially Joseph Lieberman of Connecticut (by then an Independent), the plan to include a public option—a government-operated insurance offering that utilized Medicare payment rates—was dropped.

Many of the pivotal choices on coverage were made largely for fiscal reasons. The president wanted a bill that met 3 key financing criteria: (1) the total cost of the ACA should not exceed $1 trillion over 10 years, (2) half the money to pay for the ACA should come from savings in government health programs and half should come from new revenue, and (3) the law should be self-funded and not deficit financed—if anything, the ACA should pay down the national debt (which it did).

These financing decisions shaped the structure of the reforms. Because Medicaid was less expensive than purchasing private insurance in the exchanges, it was preferable to expand Medicaid to households at up to 138% of the federal poverty level (FPL) rather than covering all the uninsured through the insurance exchanges. Because of the high cost of subsidies, they were phased out at 400% of the FPL with a steep cliff rather than at higher income levels.

Complementing these new coverage provisions, the ACA also imposed new national rules that dramatically change the way the private health insurance industry does business. Insurers can no longer “risk underwrite”—reject customers or charge them substantially more or rescind their plans due to their poor health, preexisting conditions, or other individual characteristics. In addition, insurers can no longer impose annual or lifetime caps. Other key new policies include the requirement that all ACA exchange plans must offer 10 essential health benefits and that, even outside the exchanges, many preventative services (like vaccines and cancer screening) must be covered without deductibles or co-pays. Coverage of children up to age 26 on their parents’ health plan is another popular new benefit.

There was no shortage of criticism. One consistent theme was that the ACA was 90% about coverage and did little to improve quality or cost. It is true that 3 of the ACA’s 10 titles do focus on insurance access and coverage—the private insurance reforms in Title I, the Medicaid expansion in Title II, and new provisions about long-term care in Title VIII that ultimately were not implemented because they could not meet fiscal targets of being self-financing. Title III also includes significant reforms to Medicare to reduce co-pays and make pharmaceuticals more affordable. But the ACA contains many other pages directed to improve quality. For example, the law had incentives and penalties to reduce hospital readmissions and hospital-acquired conditions and to require public reporting on performance. Some key reforms did take the form of only limited programs, such as new programmatic incentives to improve integration and coordination across physicians and demonstration projects to move away from payment for each treatment—fee-for-service—to payment for holistic episodes of care—bundled payments. These pilot projects were strategic, aiming to effect broader system-wide transformation. The establishment of integrated medical practices called accountable care organizations (ACOs) is another important example of the effort to reform the delivery system and thereby improve quality and reduce costs.

Important new centers and funds were also created, including the Prevention and Public Health Fund; the Center for Medicare and Medicaid Innovation, a novel organization within CMS given the opportunity to experiment with various approaches to improving quality and reducing costs; and the Patient-Centered Outcomes Research Institute, an organization charged with investigating the clinical and comparative effectiveness of different medical treatments. There are myriad other provisions, including provisions to facilitate a generic market in biologic drugs, to reauthorize the Indian Health Service, and to enhance the medical workforce, nutrition, and more. Taken together, these new programs and incentives mark an extensive—if not comprehensive—effort to transform and improve almost every aspect of the American health care system.

Political considerations of course shaped the bill. Because of President Obama’s inclination to appeal to Republicans and forge broad coalitions to address problems and because Senator Max Baucus, as Senate Finance Committee chair, believed he could achieve a bipartisan agreement, the ACA rests on a market-oriented structure. Indeed, its foundation adopts some conservative proposals: it was the Heritage Foundation that popularized the concept of an individual mandate—the requirement that nearly everyone hold health insurance or face a financial penalty—combined with subsidies and a facilitated marketplace where individuals could purchase private insurance. That concept was adopted by the Massachusetts Republican governor (later GOP presidential nominee) Mitt Romney. (Income-linked government subsidies to enable the purchase of private health insurance has been a Republican idea dating to the 1940s.)

In the end, despite many efforts to create bipartisan legislation, it became clear that Republicans would unanimously oppose the bill. Beginning in August 2009, that position was reinforced by a series of voluble and disruptive town hall meetings that propelled to national prominence the conservative, no-compromise, Tea Party movement.

Many factors made passage possible, including some key moments of serendipity. Many political veterans, such as Obama chief of staff Rahm Emanuel, had learned the lessons of the earlier, Clinton-era failures. The administration brought in the major health care interest groups early and offered them what they needed, including omitting controversial pharmaceutical pricing regulations, to get them on board. President Obama helped give the bill needed momentum when he urged its enactment before a rare joint session of Congress on September 9, 2009. That speech also provided an example of the deep-seated anger the ACA provoked. For the first time ever in a presidential speech to a joint session of Congress, a member of Congress publicly heckled the president. Representative Joe Wilson (R-SC) shouted, “You lie!” during the address. That insult emboldened wavering Democrats to remain supportive of the law.

House Speaker Nancy Pelosi played a pivotal role. First, she ensured there would be only one bill coming out of the 3 House committees with jurisdiction over health care reform. And even more significantly, once the victory of Scott Brown in the Massachusetts Senate race to replace Senator Kennedy deprived the Democrats of a filibuster-proof 60 Senate votes to revisit any House revision of the ACA, Pelosi rallied the House Democratic members to essentially accept the Senate bill. Pelosi’s actions were an estimable feat of effective politicking that convinced the House to abandon its own bill—which had some significant differences—and made the ultimately successful vote possible.

The ACA was enacted into law on March 23, 2010. National Federation of Independent Business v. Sebelius, the challenge to the ACA that threw the early stages of implementation into uncertainty and would eventually reach the US Supreme Court, was filed the same day.¹

Goals

Much has been written about the details of the ACA’s trajectory through Congress and its enactment politics. This book largely picks up where those accounts leave off. But to set the stage, Timothy Stoltzfus Jost and John E. McDonough analyze the problems that plagued the health care system in 2008 on the eve of the ACA’s drafting and explain how specific provisions in the ACA seek to address those problems. They also highlight what the ACA did not do, including failing to make significant advances in drug pricing and replacing “a fragmented, exasperating health system balkanized by public and private financing and delivery.”

Peter R. Orszag and Rahul Rekhi delve deeper into the policy tradeoffs incorporated into the ACA, especially around cost and quality. They suggest that many of the efforts—even if small and tentative—at cost control and quality improvement may have contributed positively to the slowdown in health care expenditures and “fundamentally altered the national conversation around health care expenditures among provider and insurer executives and in boardrooms.”

Joseph Antos and James Capretta offer a perspective of where they believe the ACA went right and wrong. Republicans have had a hard time articulating a coherent alternative to the ACA. The scores of efforts to “repeal and replace” failed, and the party faced additional challenges as it became clear that the public would not tolerate rolling back some of the ACA’s key benefits. Antos and Capretta present an alternative vision that is grounded more squarely in market principles focused on cost containment and emphasizing the need for consumer choice. It is interesting to note that, despite their disagreements with some of the policies behind the ACA, Antos and Capretta nevertheless embrace the new reality that, after a decade of the ACA, the goal of any new reform must include giving every American health coverage.

The Policy and Politics of Implementation

The ACA seems nearly inseparable from the last decade of politics—and the politics around the ACA affected both health policy and the broader electoral landscape.

The Obama administration faced political, policy, and technical challenges from the moment the law was signed. Kathleen Sebelius, who was the secretary of the Department of Health and Human Services (HHS) for the first 4 years of the ACA’s life, and Nancy-Ann DeParle