BY GAIL WILENSKY, PHD ON December 21, 2015
By Joseph Antos, PhD, James Capretta, and Gail Wilensky, PhD
A group of health policy analysts (the 3 of us plus 7 others listed below in the Editor’s note) have collaborated on a set of proposals for replacing the Affordable Care Act (ACA) and also reforming other major portions of health care delivery, such as the tax treatment of employer-sponsored health insurance, Medicaid, Medicare, and Health Savings Accounts. Because so much attention has been paid to the repeal of the ACA by those who have opposed it, we believe it is important to focus on a serious proposal that could both replace this law and provide additional measures of reform, especially to the health care entitlement programs.
We believe our reform agenda represents such a proposal. Furthermore, none of us regards the pre-ACA health care system as an acceptable alternative.
Although the ACA has reduced the number of uninsured (by about 3 percentage points from 2013 to 2014), the primary source of new coverage is Medicaid, which provides more restricted access to care than most private insurance. Moreover, the law is showing increasing signs of instability. Insurance expansion is clearly proceeding more slowly than anticipated, and is likely to fall well short of the Congressional Budget Office’s initial expectations of 30 million newly insured individuals in 2015. UnitedHealth, the nation’s largest health insurer, has threatened to withdraw from the program because of concerns over stability of the risk pool. And national health spending rose 5.3% in 2014, indicating that health costs may not continue to slow as much as ACA supporters thought they would.
Our objective is to offer a reform approach that would reduce the number of uninsured, bring greater cost discipline through market principles, return power and control to individuals and the states, and improve the long-term fiscal outlook.
Replacing the ACA
We recommend a combination of strategies to expand private insurance. Age-related refundable tax credits roughly equal to the current value of the average tax break for an employer plan would be made available to those without access to employer-sponsored insurance. Currently, the employer’s contribution for employer-sponsored insurance is untaxed; we recommend that be retained, but be capped up to 75% of the employer plan cost.
States would be given more control over their insurance markets, and would be allowed, but not required, to run exchanges. In addition, individuals who maintain continuous insurance coverage (defined as fewer than 3 months without coverage in the preceding 3 years) would be protected against higher premiums being charged due to preexisting conditions. States could also adopt a default enrollment plan for those who are eligible for a refundable tax credit but fail to sign up for coverage.
The changes being proposed offer a less federally directed and regulated strategy to replace the subsidized insurance exchange currently in the ACA. We recognize, however, that any replacement plan will need a transition. It is not our intention to abruptly end the current rules affecting anyone currently receiving subsidies through the exchanges or enrolling in the expanded Medicaid program, although we would allow individuals the option to shift to the new program immediately if they chose to do so. However, any new applicants would be considered under the new rules.
We recommend that Medicaid be viewed as 2 separate programs. One would support able-bodied adults and their children, mostly funding and supporting acute care, and a separate program would support services to the disabled and elderly. Each program would be funded by its own per capita federal funding allotment, based on historical spending patterns and adjusted to reflect annual enrollment.
For the nonelderly and nondisabled population, each Medicaid-eligible household would receive a refundable federal tax credit as their primary support, with Medicaid serving as a supplement to their tax credit. The lowest-income group of individuals would receive assistance that would cover all or most of the cost of a standard plan. Medicaid subsidies would decline gradually for those with higher incomes.
For the disabled and frail elderly Medicaid recipients, states would be able to design the type of assistance they think is appropriate, including the programs that give beneficiaries greater control over the resources that support their activities of daily living.
We recommend a premium-support model of Medicare reform that would include traditional fee-for-service Medicare as an option. Beneficiaries would receive a fixed level of subsidy that depended on bids from competing plans. This means that seniors choosing more expensive plans would pay any extra premium themselves.
Although some online decision-support tools already exist, we think it is important to develop more consumer-friendly information than currently exists on the costs of alternative plans, hospital and physician performance measures, and the out-of-pocket costs patients are likely to bear for common treatments.
Traditional Medicare needs to be modernized if it is to effectively compete with private plans. This should include combining Parts A and B into a single program with a single premium that covers both. Cost sharing should also be simplified and catastrophic protection should be added.
Some other reforms include making changes to Medigap that would require seniors to pay a portion of the deductible personally, changing the current default rules for newly eligible beneficiaries (who currently receive from traditional Medicare unless they choose an alternative), allowing seniors in traditional Medicare to choose new integrated care options, and gradually raising the eligibility age to 67.
Other reforms include changes to health savings accounts that encourage greater enrollment, making health savings accounts available to everyone (not only those with high-deductible insurance), increasing the allowable contribution for high-deductible plans, integrating the accounts into Medicare and Medicaid, and allowing tax-free withdrawals for amounts above a minimum after age 75 years. Additional reforms include reducing the federal role in graduate medical education and converting what remains to a discretionary grant program, making the Federal Employees Health Benefits Program into a fixed defined contribution rather than a percentage reflecting the average of plans chosen, integrating US military veterans into mainstream coverage and refocusing VA health care, and improving the transparency of cost and quality data that would help patients make better decisions.
The depth and breadth of the reforms listed here are not likely to be accomplished and perhaps not even attempted in a single presidential term. But together, they would significantly reorient health care in the United States away from the rise of bureaucratic regulation and towards the preferences of patients and consumers.
About the author: Gail Wilensky, PhD, is an economist and Senior Fellow at Project HOPE, an international health foundation. She directed the Medicare and Medicaid programs, served as a senior adviser on health and welfare issues to President George H. W. Bush, and was the first chair of the Medicare Payment Advisory Commission. She is an elected member of the Institute of Medicine.
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