OP-ED

Obamacare In Pictures

A seasoned colleague recently told me that some PowerPoint presentations have no power and make no point.

But sometimes, a picture really is worth a thousand words. Or maybe — in the case of any meaningful discussion of health reform, thanks to its density and complexity — it might be worth 10,000 words. Hence our handy little exhibit.

This picture captures the 10,000 words it would require to explain with technical precision where President Obama’s Affordable Care Act fits relative to all health reform plans. It places “ObamaCare” along an ideologically scaled continuum of all serious reform options developed, debated and discarded or ignored since the 1980s.

They are all here: from the single-payer, centrally controlled models popular with those who detest corporations and the influence of money in medicine — two actual, not imagined “government takeovers of health care” — to two free market, laissez-faire models favored by those who detest regulation and the heavy hand of government in medicine.

On the far left, the federal (or provincial) government is the main insurer, owns most hospitals, and employs most doctors. This pure form of single payer seems to be supported or reviled in equal measure — especially by the nation’s physicians. As a model for nationwide reform, it is like religion — people either believe it will be health care’s Messiah, or the anti-Christ, and no one will convince them otherwise. This model is the foundation for many of the systems in Europe, and the systems in Canada, Australia, New Zealand, and Singapore. Unbeknownst to many in their care, there are actually two working systems based on this model in the U.S. today: Kaiser and the Veterans Health Administration.

The second model, Medicare-for-All, differs from the pure form of single payer by retaining the current independence of most hospitals and doctors. This model jettisons private insurance companies, while an all-encompassing Medicare program pays for covered care delivered by today’s crazy quilt of providers: large and small groups, for-profit, religious-affiliated, independent, academic, the works. This is what Medicare beneficiaries have today — except for the 27 percent who opt for Medicare Advantage plans offered by private insurers. It is supported by those who believe it would bring the relative efficiencies, fairness and low administrative costs of Medicare to all, and reviled by those who think Medicare works like hell. Because there are oceans of data to support both views, this too is ultimately a matter of secular faith: government, good; government, evil.

Next is “managed competition,” the basis for the plan proposed by President and Hillary Clinton. This model is built on the current system of multiple private insurers and providers, but highly organizes and regulates both, mandating employers and individuals to participate and requiring everyone, with or without current coverage, to give up what they have and commit to one of several competing vertical insurer/provider entities. This model is based on managed care theories developed in the ’70s and ’80s, and when proposed by the Clintons in the early ’90s, was popular with much of the Washington technocracy and vilified by conservatives.

Most Republicans and health industry critics attacked “Hillarycare” as cumbersome, over-engineered, and hyper-bureaucratic. It was destroyed in the court of public opinion by an insurer-funded TV ad campaign — “Harry & Louise” — that people remember better than any details of the plan itself. Modified versions of this model exist in Germany and Israel, and in a handful of U.S. markets (e.g., San Francisco and Portland, Oregon, sort of) with vertically integrated providers who compete with Kaiser.

To the right of “Hillarycare” is President Obama’s Patient Protection and Affordable Care Act, known as “PPACA, “the ACA,” or “Obamacare.” It retains most of the features of the current employer, insurance and provider systems, but expands all of its current dimensions by mandating that most of the uninsured participate in it, unless their incomes are low enough to qualify them for an expanded version of Medicaid.

Obamacare requires insurers to compete for customers through health insurance exchanges, deeply misunderstood and thus easily politicized creatures, as I discussed here last week. Obamacare outlaws insurers’ discrimination — and price-discrimination — against people with prior health problems. And it standardizes insurance coverage by market to focus insurer competition on price and service rather than plan design. Because Obamacare requires insurers to cover all comers — and does away with caps on those with catastrophically expensive medical situations — it is funded by mandated participation by almost everyone, either directly or through employers. It is based on principles of market competition developed by conservatives and proposed by Republicans as an alternative to Hillarycare.

To the right of Obamacare are two versions of free market models — containers for the “replacement” options crafted by or pointed to those who want to “repeal and replace” Obamacare. Both shift all purchasing decisions about coverage and plan design to individuals and insurers, believing this will reshape markets and drive efficiency in pricing and overall medical resource use. Most versions do not require anyone to purchase insurance, nor any insurer to cover anyone.

The two models differ mainly with regard to how health insurance and non-covered medical expenses are treated by the tax code. Proponents of the model on the far right believe that market distortions created by the tax deductibility of health insurance and expenses are enormous, and the extra political mile it would take to eliminate these well worth the effort in terms of marketplace correction and health system self-reform.

The first of the two models on the right actually expands the current system of tax deductibility of health insurance and direct medical expenses to individuals and the self-employed. Its architects believe this would level the playing field for insurance purchasing, ease out the distorting role of the employer from the system, and convert much of what is covered today by health insurance to health savings accounts and cash payment. The model would allow small businesses and individuals to pool together to buy whatever coverage they wanted across state-lines — the “Association Health Plans” often put forward by Republicans — a modified version of which is included in Obamacare as the “Multi-State Plans.” We have a version of this model in the US right now in miniature: dentistry.

The model on the far right also seeks to reduce the role of the employer in health care, but is structured on the belief that a better, faster way to get there is by removing the tax deductibility health care spending. Its proponents believe this would extract employers from the system in short order, convert health insurance into something resembling auto and homeowners insurance, and maximize the power of market forces to control health care spending in general. Under this model, everyone is free to purchase whatever mix of insurance and services they want and can find, from whatever organization will sell it to them, at whatever price the market yields. Modified versions of this model exist in China and India on top of threadbare single-payer systems incapable of serving the needs of their large and growing populations and emerging middle classes.

The proponents of both models on the right believe their inherent pricing efficiency would drive the marketplace to very high deductible insurance plans while converting routine medical care to a cash-and-carry system. Both models would subsidize the uninsured and others priced out of these markets with either a “premium support” or “voucher” program — two ideas that sound similar but play out very differently as health care costs increase.

The core economic reform mechanisms of the two models on the right show up every few years by newcomers to health care from the business sector, usually after a jarring personal encounter with the health care system. The latest entry is David Goldhill and his Catastrophic Care: How American Health Care Killed My Father — and How We Can Fix It. The subsidy mechanism — loaded with dangerous ammo for semantic and political branding wars over “premium support” vs. “voucher” — is the economic fulcrum in Congressman Paul Ryan’s proposal for reforming Medicare.

The above illustration of health reform plans along a political continuum reveals one of the more bitter political ironies of our time: President Obama’s health care reform law is based, for the most part, on right-of-center ideas.

This may have escaped the notice of most journalists and pundits and, for obvious reasons, the president’s legion of political opponents. But it is an odd and awkward fact for those in the trenches of health policy who care more about reforming the health care system — if only in hard-fought, belated baby steps — than they do about the purity of models, the promotion of a broader ideology, or the mud-slinging and name-calling that has come to define our national politics.

That Obamacare is a right-of-center plan, especially when viewed relative to all viable alternatives, explains why it has so little political support from either side. Liberals hate Obamacare because it is not single-payer, and feeds tens of millions of newly insured people to what they revile as a money-gobbling, profit-obsessed health insurance dragon. Conservatives hate Obamacare because it is the heavy, stupid hand of Big Government choking whatever air is left out of the current, dysfunctional health insurance market. That, or because they cannot see beyond their political rage at President Obama to recognize their own ideas at the core of his health reform plan.

Ideologically, this makes Obamacare a political orphan. And Washington, D.C., even back in the days of decorum and actual policy discussions, has never been kind to political orphans. How else to explain why the president (e.g., in his inaugural address, State of the Union speech) makes almost no mention of what could prove to be his signature domestic achievement — even as tens of thousands of Americans working for health insurers, hospitals, physician practices and other health care organizations grind away at its implementation.

Perhaps this is because Obamacare, which will affect to some unknown degree nearly one-sixth of the U.S. economy, has been reduced to a broken political piñata. Another seasoned colleague recently told me that the reason I do not understand the disconnect here is because the health reform “debate” has nothing to do with the substance of Obamacare as policy and everything to do with its politics.

Those interested in understanding where the plan fits into decades of earnest struggle with this difficult and important subject — rather than scoring political points against the president — would be well advised to consult this one PowerPoint slide.

J.D. Kleinke is a pioneering health care information entrepreneur, medical economist, author, policy expert, and business strategist.

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Patrick Pinecivisisusbev M.D.William HershJ.D. Kleinke Recent comment authors
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Patrick Pine
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Patrick Pine

J.D. – your chart is great and thanks for sharing it. My two big concerns with Obamacare are still that it includes what I call “too many moving parts” and that trying to effectively coordinate all of the moving parts by later this year is simply impossible. Opponents of Obamacare think this is intentional as a prelude to ‘single payer’. My contention is that if there is an effort to roll out the enrollment process and it is deemed by a significant portion of the population to be disastrous that the Obama Administration and the proponents will not get a… Read more »

civisisus
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civisisus

count me confused by the conversation regarding “wasteful” patients & docs. comparisons of US care usage with other nations indicate Americans don’t use significantly more health care than people in, say, Switzerland. What we DO do is pay more for it. Our prices are higher.

Barry Carol
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Barry Carol

Margalit – The Swiss spend 12% of GDP for healthcare as compared to our slightly less than 18%. So, they pay 2/3 of our cost, not half. Also, they have 83 insurance companies in a country of seven million people. The six largest insurers account for about 80% of the business. I don’t think insurer administrative costs are a big issue in the scheme of things. I do think though that there is more that our insurers could do to standardize payment rules, especially for different policies offered by the same company, and to move toward uniform documentation requirements as… Read more »

Barry Carol
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Barry Carol

“We are being driven into insolvency by corporations extracting profit from the system, which is not the case in those European countries” Margalit – I flat out disagree with this except in one area – brand name drugs. I support the use of more restrictive formularies and/or reference pricing to reduce brand name drug costs in the U.S. If we were successful in doing this, I think drug prices would rise somewhat in other countries as drug makers argue that they need to recapture some of the lost profits from the U.S. market in order to sustain research and innovation.… Read more »

Margalit Gur-Arie
Guest

Barry, if you add together what we could save on drugs and devices and the incidental 1% here and 5% there, and throw in the administrative expense caused by the fragmentation of payers and payer rules, you just may be able to get to Swiss percentages of GDP. It’s not like they can do this for half our price, and we shouldn’t expect that either.
As to non-profits, well, I am not sure what that means any longer, other than not paying taxes.

Margalit Gur-Arie
Guest

Bev & Barry, Obviously not everything people want or everything doctors prescribe is either needed or necessary, and obviously much can be done to objectively (objectively being the key word) assist with decision making for both parties. I am proceeding under the assumption that most physicians are not crooks and most patients are not stupid. I see the doctor’s job to be one that includes teaching and explaining disease, treatments, benefits, harms and scientific evidence while the patient’s job is to weight the information and make his/her decision. And as Dr. Berwick said, if they still want that extra MRI,… Read more »

Barry Carol
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Barry Carol

bev M.D. — I strongly agree with you on both points a and b. I’ve also said many times that lots of patients think more care is alwlays better care and more expensive care is always better care when much of the time, it isn’t. They also often think that doctors who don’t order every possible diagnostic test, especially imaging tests, aren’t sufficiently thorough. Then they wonder why insurance costs so much and their employer can’t afford to give them much of a raise. Doctors also order plenty of tests for defensive medicine reasons alone. They wouldn’t order them for… Read more »

Barry Carol
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Barry Carol

Margalit – As you know, the Swiss system has no public option even for the elderly. People are required to buy their own insurance but 45% of the population qualifies for a subsidy. As a result, about 35% of healthcare costs are covered by insurance premiums individuals pay themselves, another 35% comes from the taxpayer funded subsidies plus a portion of hospital operating costs and 30% is paid for out-of-pocket. In the U.S. the out-of-pocket number is 12%-13%. No insurance plan anywhere covers everything. They all have lists of covered and non-covered services. Mr. Zeltner probably meant services that doctors… Read more »

Barry Carol
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Barry Carol

Margalit – The NYT did write about the Health Affairs article I mentioned about a week or so ago. By the way, the entire February, 2013 issue of Health Affairs is devoted to the issue of patient engagement as part of a strategy to improve both care quality and cost-effectiveness. Your comment seems to suggest that there is no such thing as wasteful, unnecessary, inappropriate or overpriced care. If a doctor recommends it, we should pay for it no questions asked. Even if the doctor doesn’t recommend it but the patient still wants it anyway, we should still pay for… Read more »

Margalit Gur-Arie
Guest

Barry, I suggested no such thing, but yes, if “a doctor recommends it, we should pay for it no questions asked.” Just to remind you, in another Health Affairs article I know you read, Thomas Zeltner (the ex-boss of Swiss health care) said: “First, whatever a doctor prescribes, the health insurance plan deems appropriate and therefore covered.”. As you know I am a fan of that particular system, which seems to thrive by providing its citizens as much choice as possible, and its mostly independent doctors as much freedom as they need to practice medicine. And it’s still much more… Read more »

bev M.D.
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bev M.D.

Margalit, along with Barry I am confused by your comments. Are you saying that a) no patient ever insists on care despite it being unneeded care? and b) that everything a doctor prescribes is necessary care?
I would have to answer those questions a) plenty of patients want all the care they can get whether needed or not and b) plenty of docs prescribe unneeded care (see defensive medicine, influence by pharma, and just plain ignorance)
Your views are not clear to me from the way your comments are worded. Thanks.

J.D. Kleinke
Guest

That is high praise coming from you, Bill. By all means!

As you well know, this problem is indeed hard – and pointing fingers and throwing mud, as fun and productive as it may seem, helps no one. (Or am I just over-reacting to my re-location to Washington DC?)

Was hoping to see you at HIMSS…
http://www.himss-oregon.org/events/events.html
…but next time!

William Hersh
Guest

JD,

This is great! I hope you won’t mind me pointing students to it (with attribution!). I am sorry to say I will have to miss your talk in Portland in a couple weeks since I will be out of town.

Bill

Jardinero1
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Jardinero1

I would replace the word “Hybrid Plans” on the top with either “Fascist Plan” or “Crony Capitalism”. Otherwise, I think it is a fair summary.

J.D. Kleinke
Guest

Ok, that made me laugh. If I had to pick one, I’d go with the latter. “Fascist Plan” really would cover the one on the far left – yes, health reform and its ironies – and in a move toward editorial fairness, I’d re-label the one on the far right “Lord of the Flies Plan.”

Margalit Gur-Arie
Guest

Wow Barry, thank you for the link to the Health Affairs article. I hope the NYT picks it up and gives it due space preferably on the first page. Such a crass attempt to paint Americans as irresponsible and selfish because they expect excellent care regardless of ability to pay and because they are not willing to risk their lives in defense of insurers and “health” corporations profit margins and excessive executive pay is sure to resonate with the public in much the same way Mr. Romney’s moocher comments did, and the part about performing “psychologically informed interventions” for the… Read more »

Barry Carol
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Barry Carol

Peter1 – BCBS of NC or any other insurer won’t be able to compete effectively if its costs are excessive, On the claims side, BCBS of NC probably has lower reimbursement rates per service, test and procedure than competitors because it has the largest market share in the state, I think. With respect to executive compensation, I don’t know how their prior year numbers stack up against local and regional health insurance competitors but the marketplace for executives in all major industries is national in scope. If you want to attract and hold competent people, you have to pay competitive… Read more »

Barry Carol
Guest
Barry Carol

As a right of center fiscal conservative / social liberal, I actually have fairly high hopes for Obamacare. I have two main fears though. The first is that the subsidies to purchase health insurance will cost taxpayers significantly more than the CBO estimates. We will get the verdict on that issue soon enough. The second relates to an article published in the most recent issue of Health Affairs titled “Focus Groups Highlight That Many Patients Object to Clinicians’ Focusing On Costs.” The prevailing attitude that more care is better care, more expensive care is better care, and I want the… Read more »

Maggie Mahar
Guest

J.D. Not all liberals hate “Obamacare” becuase it is not single payer. Liberals who have read the Affordable Care Act (ACA)realize that it moves us much closer to the health care models used in Western Eurupe (none of which are single-ayer) where government palys a much greater role in regulating heatlh care. As you know, under the Affordable Care Actt CMS (Medicare and Medicaid,) will be chaning how we pay for health care, by moving away from paying for volume( fee-for servcie) and instead paying for value (better outcomes at a lower cost) with providers having “skin in the game”… Read more »

Peter1
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Peter1

But Maggie, we don’t buy from providers, we buy from insurance companies.

This year BCBS of NC (non-profit) raised it premiums 8.8% (compounded yet again) and lost profits, and to reward its executives for this “success” raised their compensation an average of 40%. This even when BCBS spends about 87% of revenues on patient care (above state mandate). BCBS ads tell us how they’re working to lower our healthcare costs.

Tell me how Obamacare will change this?