It was the Mother of unintended consequences.
By the time of the 2016 elections, health plans, hospitals and health systems had squeezed and consolidated and trimmed and cut costs under the gun of lower Medicare reimbursements and the new rules of Obamacare — but mostly they had adapted. Most of them had survived.
On November 9, the country woke to find itself with a Republican President-elect, a Republican majority in the House, and a Republican majority of 55 in the Senate. The Grand Old Party was dedicated to repealing #EveryWord of the Affordable Care Act, the hated Obamacare which was, after all, “destroying the country,” “the worst thing to happen to the country since the Civil War,” and “equivalent to slavery.”
The changes to healthcare did not wait until Inauguration Day, much less until the 115th Congress could assemble to gut the law. They began instantly.
November 9, of course, was just nine days into the annual Open Enrollment period for plans under the Affordable Care Act exchanges. Many of the 12.7 million who had signed up for 2016 could see that the subsidies they were getting through the exchanges would likely disappear in the wake of the election, and decided not to sign up. “Why chance it?” as Betty Cornwall of New Rhodes, Kentucky, put it to Fox News’ Megyn Kelly.
Health plan strategists, masters of not getting blindsided by risk, decided that it was a bad idea to sign up millions of people for plans without knowing what would happen to the law. They did not want to get stuck with serving people who did not pay, and did not want to get blamed for dumping people after they had signed up. So most large health plans withdrew immediately from the exchanges, before many more people could sign up, draining the exchanges in many states of any choices at all.
Meanwhile, many of the legislatures of states which had expanded Medicaid with the help of federal dollars did not wait until January, but met in lame duck sessions to withdraw from the expansion program, throwing some 9 million people off the Medicaid rolls.
The sledgehammer of the new year
January 1, 2017 fell like a sledgehammer on hospitals and health systems across the country. They experienced an instant contraction of revenue as the rolls of the uninsured expanded by nearly 20 million people overnight. For some the drop in income was 10 percent. For others it was as great as 50 percent or more — especially the rural hospitals, some 700 of which had been reported to be on the edge of bankruptcy already, and the inner city hospitals serving the legions of urban poor. Few outside the industry realized how precarious the finances of many hospitals had become as they struggled with new risk contracts, bundled payments, and complex accountable care organizations.
As the new Congress gathered in early February, Congressional Republican leaders cautioned that implementation of any repeal would not be phased in until 2018, and in any case they would have legislation to replace key points of the law. But it was already clear to political commentators that the GOP had no unanimity on any issue except repealing the law, and no clear consensus on how to replace it. In fact, a substantial portion of the conservatives in both houses did not want to replace it at all.
More careful observers noted that without 60 votes in the Senate, they could only repeal the parts of the law that did not lower the deficit. So under reconciliation rules, this meant that for the most part they could only repeal the parts of the law that were popular, such as the restraints on insurance plans and the subsidies, and not the parts that were unpopular, such as the annual penalties levied for not having health insurance.
But much of the damage had already been done. The failure of the exchanges and the states pulling back from Medicaid expansion had been so catastrophic that it already had a name: the Grand Rescission.
The domino fall of bankruptcies
First word of actual bankruptcies came from small rural hospitals, then large inner-city hospitals in Philadelphia and Baltimore. Then suddenly only a month into the new year, the entire Gargantua Magna system with its 25 hospitals in the Eastern Corridor filed for bankruptcy protection. CEO Clarkson Humblebee told Gwen Ifill on PBS News Hour, “Frankly, we have to get out in front of this instantly. Our revenues are down instantly by 34%, and by our analysis they will continue to drop. And there is no sign of any quick rescue by Congress. We have no way to keep the doors open, lights on, buy supplies, meet our bond obligations, and pay our wonderful doctors and nurses and other employees. Can’t do it. There is no magic arithmetic that gets us there. The adjustments that get us there will take years.”
Ifill asked, “Is this a restructuring under some kind of receivership, so that you can keep operating as it’s worked out?”
“No,” said Humblebee. “As of tomorrow we are closing, finding places for current cases to go, scaling back everything that can be scaled back, suspending bond payments. We’ll keep five Emergency Departments open in the hardest-hit areas. Then we will likely begin unwinding the whole system, selling off facilities, spinning off clinics. We don’t know how yet exactly what we will do, but frankly we don’t have any alternatives.”
After that came the deluge. Bankruptcy announcements came in the dozens, then hundreds. As each hospital failed, its neighbor hospitals were overwhelmed with ever more cases, ever more accident victims and cancer sufferers with no ability to pay. Within three months nearly half of U.S. hospitals and systems, and hundreds of medical groups, had filed for bankruptcy. The market was flooded with out-of-work physicians, nurses, and technical staff. The press was flooded with stories of people dying in their homes and on the streets because there was no place to go. States organized stop-gap measures such as free clinics, but these did not help much with the serious cases. Sales of opiates skyrocketed. The out-of-work doctors could still write scrips for their former patients, and without functioning hospitals and surgical suites, often all they could do was help people drown their pain.
Recession and the Death Count
The huge sucking sound of the open drain under the healthcare economy — close to one fifth of the national economy — was so large that the economy as a whole plunged into recession in a matter of weeks.
The news show Nightline began a nightly count of people dying untreated due to the closings, often illustrated with mini-segments on who the people were, what kind of lives they had, and how they had died. As the numbers grew into the thousands, then tens of thousands, and the recession rapidly deepened, the clamor grew for the government to do something. Even ex-President Bush called the moment “Clearly a disaster of national scope.”
As indeed it was, affecting personally and drastically people of every part of the country, every class, every age, as national and widespread an emergency as the country had felt since World War Two.
The President, the leader of a party that had agitated for a decade for smaller government and especially less government involvement in healthcare, had little choice. He and his party could not stand by and watch the disaster unfold.
In the famous “Doctor Rescue” speech, televised from the Oval Office, he declared a national emergency. The country was, he said, on a “war footing” until they could get the system back on its feet again. He was taking specific and immediate action. He declared hospitals and health systems to be under federal receivership under a national Healthcare Executive. He explained that this would work much like the way Obama had taken General Motors into receivership, then returned it to private ownership after it was healthy.
To be fair in the re-allocation of resources that would be necessary, this would include all hospitals and systems, for-profit or not-for-profit, already bankrupt or still struggling. This emergency Healthcare Executive would be instructed to assembled an analysis team to examine ways to get the system back on its feet and privatized again. The HE would have full power to cut through the usual web of red tape and where necessary to merge, close down, or spin off hospitals into various special uses such as women and children or cancer care. Under its emergency powers, it would be able to dictate prices for pharmaceuticals and devices, just as most advanced countries already did. By matching European prices, it would in effect create a global pricing system. To pay for this, he declared an immediate temporary expansion of Medicare to all ages, working through the existing private insurance structure as much as possible. He would, he declared, seek emergency legislation immediately from Congress.
“We have the greatest healthcare system in the world,” he said, “but it has suddenly fallen on very hard times. We are suffering. Americans are dying. But we have all the pieces to make it work again. The doctors and nurses and technicians are there, the wonderful machines and pharmaceuticals are there, the buildings are there. All we need is a strong hand to make it all go again and put its house in order. But just as in any other truly national emergency, there is no other hand strong enough to do that than the federal government. So we will take up the challenge, starting immediately. We can do this. God bless America. Good night.”
The Wave Recedes
The wave of bankruptcies stopped. Congressional Republicans were far from united behind the President. But they also had little choice. Their own party leaders warned them that they would be blamed for one of the greatest disasters in American history. With the help of most Republicans and many Democrats, the President got his legislation. In a matter of days, some hospitals began to re-open their doors in anticipation that federal help would soon be on the way.
Within 18 months after the Grand Rescission, rapid and forceful work of the Healthcare Executive and the new flow of Medicare-for-all funds had begun to stabilize the system.
Ahead: A Return? Or the New Normal?
Now, as we begin to approach the 2020 elections, the Republican Party is deeply fractured. Conservatives in Congress and in state legislatures continue to decry the rescue as a betrayal of principles and wish to dismantle all of it as quickly as possible. Yet the rescue has proven broadly popular. For much of the country it has relieved the constant financial anxiety that healthcare had become. Paul Krugman, Robert Reich and other liberal pundits continue to rail that the public should blame the Republican Party for causing the great disaster in the first place. But most of the public seems more inclined to give the President and his party credit for the forceful action. The President and most of his party have little incentive to back away from this wave of popularity.
As the next election season starts up, it is clearly proving irresistible to the President to take credit for the rescue and indeed campaign on the preservation of the new national healthcare system. 2020 promises to be another interesting election year.