Dr. Ezekiel Emanuel was a White House adviser to President Barack Obama on healthcare and a key architect of the Affordable Care Act, commonly referred to as Obamacare. Today, he says he knows how to fix it. Emanuel shared with Salon his diagnosis of what ails the program and his recommendation for how to get the American health care system back on its feet, even with the unexpected arrival of President Donald Trump and the Republican Party in control of Congress.
During the presidential campaign, Donald Trump said that Obamacare is a “total disaster.” Is he right?
No, Obamacare is not a disaster. Obamacare made enormous advances toward solving the problem of how best to provide health care in this nation. It moved us forward a great deal as a society.
But Trump is vowing to repeal it as president.
Although this may seem counterintuitive, Trump is actually well positioned to make great improvements to the health care system.
I’m very surprised to hear you say that. He appears hell-bent on destroying your program.
So I’ve heard. But Trump actually has a tremendous opportunity to do enormous good for the nation.
Before we get to that, help me understand why you think Obamacare is not a disaster, especially since it is rather unpopular.
I think we need to distinguish its reputation from its reality. I agree that its overall reputation is poor. That is largely a problem of communications and branding. But its improvement over the prior system that existed in 2008 is clear and well documented.
In the days before the Affordable Care Act, the health insurance system was broken. People not covered by their employers who were sick -- namely, people who needed insurance the most -- could not obtain insurance at all. Insurance companies refused to insure them. And people who suffered catastrophic illnesses, such as needing a bone marrow transplant for cancer, blew through their insurance limits and had no way to pay for their care. Many people found themselves facing bankruptcy simply because they happened to be unlucky enough to become sick.
Obamacare came along and fixed this. It made giant strides forward that today are easy to forget.
For instance, the so-called “preexisting condition” exclusion is perhaps the most widely known. Under the Affordable Care Act, insurance companies can no longer deny a person coverage or charge them an exorbitant premium merely because that person already suffers from an illness.
The Affordable Care Act also did away with maximum limits on coverage. People no longer need to worry that a catastrophic illness could exceed their insurance limits and instantly wipe them out.
It also changed the game by no longer making health care dependent upon employment. Previously, if you lost your job or quit your job to start a small business, you also lost your health care. This was an enormous problem for countless Americans. Under Obamacare, this is no longer a concern because individual insurance is now readily available regardless of employment status.
The list of improvements goes on. Obamacare imposes a ban on “recissions” to prevent insurance companies from dropping people who become sick. For lower-income households, Obamacare provides subsidies that reduce the premiums to make the insurance affordable. And Obamacare enables adult children to remain covered under their parents’ plans until they reach the age of 26.
All these major reforms are wildly popular, with support from about 75 percent of Americans.
What about overall costs? There is a widespread perception that Obamacare is just another expensive government giveaway by Democrats.
That would be a misperception. One significant accomplishment of the Affordable Care Act is that it has contributed to substantial cost control in the health care system. Since its enactment in 2010, the per-person costs under both Medicare and Medicaid have declined. For people with commercial insurance, the growth of costs has declined. And healthcare costs generally have increased at a significantly slower rate than their previous rate of increase under President George W. Bush. While not all of this cost control is attributable to the Affordable Care Act, much of it is.
By any metric -- access, cost and quality -- Obamacare has largely been successful. Over 20 million people now have health insurance who did not have it before. Cost increases in the system are lower. And Americans insured through the Affordable Care Act are largely happy with the service they receive.
So how do you explain the fact that Obamacare has been so vilified and has become so unpopular?
This is indeed a tragic tale of how something so beneficial could become so maligned. A main factor was communications around the Affordable Care Act. The Obama administration did a poor job of explaining the new reforms to the public. The administration should have deputized hundreds of sympathetic physicians and nurses to explain what the Affordable Care Act was all about and why it was good. And when the new government website failed to work properly, this undermined the “brand” and created a terrible first impression that was difficult to overcome.
Of course, the poisonous partisan atmosphere was also a factor. The GOP did not wish for Obamacare to succeed. President Obama repeatedly extended an olive branch to Republicans by emphasizing that core aspects of the Affordable Care Act, the exchanges and individual mandates, were based upon conservative ideas. And Democrats repeatedly tried to negotiate with Republicans in 2009 to create a bipartisan bill. Some people may remember the “Gang of Six” and the “Gang of Eight,” groups of Democrats and Republicans trying to come to agreement on the Affordable Care Act. But the GOP never could agree.
After the passage of Obamacare, the GOP waged a relentless attack campaign against it for years that had an enormous effect in turning public sentiment against the program. This is a classic example of a political party placing its own self-interest ahead of the good of the nation overall, and it is truly unfortunate.
An unpopular element of the Affordable Care Act is the so-called “individual mandate.” The mandate requires every American who can afford it to obtain health insurance, or else pay a penalty. The unpopularity of this aspect is perfectly understandable. After all, no one likes to be required to purchase anything regardless of what it is, especially if it costs hundreds of dollars per month.
But the individual mandate is the key to making the entire program work. This mandate, though unpopular, enables the program to provide other benefits that are very popular. We just need to keep in mind that we cannot have our cake without the mandate.
Trump and the GOP say they will repeal and replace Obamacare. Can they do that?
The bigger threat is that they might repeal the Affordable Care Act without specifying what they would enact to replace it. This would create huge uncertainty, drive insurers out of the exchanges, and leave millions of people uninsured.
But could they actually repeal and replace Obamacare? In reality, it is not as easy as it seems.
The problem for the GOP is that, in their six years of opposition to Obamacare, they have failed to produce a realistic replacement plan that achieves the goals of universal coverage, no preexisting disease exclusions, affordability, and the like. They have offered many alternatives, such as a proposal from Speaker Paul Ryan, one from Rep. Tom Price [who is now Trump's secretary-designate of Health and Human Services] and another from Sen. Orrin Hatch. But such proposals tend to throw millions of people off coverage and jeopardize the preexisting condition exclusion for people who are already sick.
Do any of the Republican ideas for replacing Obamacare have merit?
Some Republicans have offered constructive suggestions for making various adjustments to Obamacare to improve it, and these suggestions are welcome and valued. For instance, some have suggested changing the way younger and older people are charged in the health care exchanges: For example, lowering the premiums for younger people and increasing them for older people, with a maximum of five times what a younger person pays. This could increase the number of young people in the exchanges. Other GOP suggestions seek to tighten up enrollment by deterring people from gaming the system by waiting until they are sick to buy insurance.
But the GOP proposals tend to contain serious flaws. Speaker Ryan’s plan, for example, grants the same amount of government subsidies to all Americans. So the wealthiest among us, such as billionaires like Bill Gates and Warren Buffet, would receive government assistance to buy their insurance. Sen. Hatch’s plan thankfully does not provide subsidies to wealthy people at the top, but it fails to provide adequate subsidies to Americans at the bottom.
Trump has not offered any concrete ideas about his Obamacare replacement. During the campaign, Trump advocated for permitting insurance companies to compete across state borders. Well, this has already been tried in three states and it just does not make much difference. We already know that there is no magic in this.
Another GOP proposal for insuring people with preexisting conditions is to create and subsidize high-risk pools of sicker people. But this has already been attempted in various states and the data shows that this is an inefficient approach to allocating health care resources. An expenditure of $25 billion would result in covering only 3 million Americans.
Another GOP proposal is to restructure Medicaid into block grants from the federal government to the states, and then let the states implement their own health insurance systems. But this is a “cost shift” that transfers the costs from the federal government to the states without solving any problems. And it could result in various state programs failing to adequately serve the needs of citizens, which would create an entire new set of problems.
The GOP suggestion of eliminating required minimum standards in insurance plans would take us back to the days of insurance companies selling expensive plans that provided inadequate coverage. And the GOP preference for health savings accounts is also not a panacea. While health savings accounts may be fine, they certainly do not constitute a comprehensive plan for providing health care.
The GOP claims it will repeal Obamacare's unpopular “individual mandate,” but keep the more popular aspects, like preventing insurers from denying coverage for “preexisting conditions.” Wouldn’t this approach be popular?
Sure, it would be very popular. But I am skeptical that it would be successful. The individual mandate, unpopular though it may be, is the key to making the entire program work. Without the mandate, it is impossible to provide the very popular preexisting disease exclusion. These two aspects are inextricably combined. The former is a necessary condition to the latter.
Remember, providing insurance to people who are already ill is expensive. If insurance companies were insuring only sick people, they would not be in business for very long. The key to the overall program is that insurance companies must sell policies to many more people who are young and healthy in order to be able to pay for the fewer people who become sick. The purpose of the mandate is to ensure that enough healthy people are buying into the system.
The Republican alternative to the mandate is “continuous coverage.” This approach provides lower premiums only to those people who continuously maintain their insurance. The problem, however, is that for people who let their insurance lapse, the insurance companies can then increase their rates based upon the illnesses they possess.
Beware of claims that the individual mandate can be eliminated while still providing adequate insurance to people with preexisting diseases. The math does not work. So there is usually some sort of a catch.
The Republican Congress has already passed a bill to repeal Obamacare, but Obama vetoed it. Speaker Paul Ryan now says that he will present this same bill to President Trump after his inauguration. What if this happens?
This would be a foolish political blunder by Trump, so it is unlikely to happen.
The problem with passing this repeal bill is that, while it does indeed repeal Obamacare, it does not in fact replace it. Instead, the bill grants Congress two years to devise a new replacement plan.
Repealing the national health care system without replacing it at the same time with something new would be the height of irresponsibility. This would inject a level of uncertainty into the marketplace that alone could plunge the market into chaos.
The health care industry constitutes an enormous segment of our national economy, comprising 18 percent of gross domestic product. The health care industry is now entirely structured around Obamacare, including hospitals, insurance companies, doctors’ offices, pharmaceutical companies and all the rest of it. Just repealing the Affordable Care Act without simultaneously replacing it would throw millions of people out of coverage and send such a jolt to the health care industry that it could ripple through the larger economy as a whole, and Trump would be blamed for the mayhem.
Obamacare, though, is facing problems of its own. The two main concerns are that premiums are increasing significantly for next year, and health insurers are pulling out of the market.
Yes, these are problems. The bigger of these two problems is the increase in premiums for ordinary Americans. But again, it is important to keep this in perspective.
Premiums are actually lower under the Affordable Care Act. If Obamacare had never existed and if health insurance premiums for people who receive their coverage through their employer had continued to increase at the same rate as during the presidency of George W. Bush, then annual premiums today would be about $4,000 higher.
What is the overarching cause of the current problems with Obamacare?
For the system to function properly, the system must attain the right balance of many more healthy people buying insurance in order to pay for the fewer people who become sick. As it stands now, the system is out of balance, in that many sick people have sought the insurance and not enough healthy people are participating.
In general, younger people tend to be healthier, although, of course, this is not always the case on an individual basis. The solution, therefore, is to increase the participation of healthier and younger people.
Some have said these problems are big enough that Obamacare is now in a “death spiral.” Is this the case?
No, Obamacare is not in a death spiral. The underlying economic model for the program remains valid. The program just needs a set of modest adjustments to get it back on course.
We passed the Affordable Care Act six years ago. I often say that no company ever does a launch of a major new product without making changes along the way in response to problems and unanticipated situations. Mid-course corrections and reforms are always needed, no matter how good the original plan. A key problem with the Affordable Care Act is that for the six years since it was enacted there have been no mid-course corrections, due to the political gridlock in Washington. The Republicans are largely responsible for this. They do not wish to “reform” or “improve” the Affordable Care Act. Their only words are “repeal and replace.”
So how would you fix Obamacare?
Fixing Obamacare is actually not all that difficult. What is needed is to implement a set of measures designed to guide the program in the desired direction. It is sort of like taking your car into the shop for a tune-up. Mechanics put the car up on the rack and make a whole series of adjustments. This is what Obamacare needs. I’ll give you a few examples.
One measure would be to extend the expiring risk-mitigation programs. When Obamacare was being developed, the insurance companies faced substantial uncertainties in forecasting the potential profit or loss from participating in the exchanges because uncertainty existed about the number of people who might enroll and the extent of their health care expenditures. This uncertainty caused the insurance companies to increase their pricing. So Congress agreed that the government would provide various risk-mitigation programs, such as the risk corridor program and reinsurance, to help defray unanticipated expenses.
Under the risk corridor program, for example, both profits and losses are shared if the actual health spending by enrollees varies substantially from the forecasts. In other words, if the insurance companies earn a high profit, then a portion of this profit is paid to the government. And if the insurance companies suffer a significant loss, then a portion of this loss is reimbursed by the government. This provides greater certainty to the insurance companies and results in lower premiums.
As it so happens, both the risk corridor program and the reinsurance program are expiring at the end of 2016. And lo and behold, premiums for 2017 are increasing substantially. Extending these risk-mitigation programs would likely cause the insurance companies to lower their premiums. Lower premiums, in turn, would lead to greater participation by more healthy enrollees.
Another measure would be to increase the penalty for not purchasing any insurance. When the penalty is significantly lower than the cost of purchasing the insurance, some people will elect to simply pay the penalty. But as the penalty increases, not only would more money flow into the system, but more people would be inclined to purchase the insurance. This would increase enrollment.
Another measure would be to increase the government subsidies. This would lower the cost of the premiums and thus cause more people to purchase the insurance.
A number of other measures exist as well, including some from Republicans. The net effect of all these measures would be to lower the cost of premiums, increase participation in the program by healthy people, and increase the number of insurers participating in the marketplace.
Why haven’t these adjustments to Obamacare already been made?
Well, this returns us to politics. Year after year, the GOP-controlled Congress refused to make any adjustments to the Affordable Care Act. This has been problematic to the program because any large new initiative like Obamacare would certainly require adjustments. Effectively, the GOP has been strangling the program for political reasons because a failure of the program could then be attributed to Obama and the Democrats.
What is the future of Obamacare? Is it dead under President Trump?
If Trump blindly follows the current GOP strategy of repealing Obamacare without simultaneously replacing it, we could be in for a big mess. But there is also a real opportunity here for Trump to break through and make an extraordinary accomplishment.
Trump claims to be “anti-establishment,” free from the dictates of any political party, and someone who would cut through the political knots in Washington to act on behalf of the common people. This situation presents him with a golden opportunity to do just that.
Trump could cause the GOP Congress to stop strangling Obamacare and instead to implement changes that would fix it. This would restore stability to the health care system. Trump would be celebrated for this achievement.
Of course, Trump and the GOP might play politics here and attempt to take full credit for it all. They might package and market the new legislation as “repealing and replacing” Obamacare. Who knows, in full Trump style, Trump might even rebrand it all as “Trumpcare.”
Regardless of the marketing, packaging, publicity and optics, Trump actually does have a tremendous opportunity to break through the politics of Washington to make adjustments to the existing health care system that would truly benefit millions of ordinary Americans and achieve the goals of universal coverage, no preexisting disease exclusion, and affordability. The American people would then receive the improved health care system that they deserve.
Despite your association with President Obama, if President-elect Trump calls, might you agree to help him?
I was raised to believe in the civic responsibility of serving our nation and I am always willing to help improve our health care system.
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