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Senior and Post-Acute Healthcare News and Topics

Obamacare/ACA: Where it is at, why and where next

A number of my regular readers and clients routinely ask for my thoughts/analysis on where the Reform Act/Affordable Care Act/Obamacare is at, particularly in-light of the recent one-year delay in the employer mandate.  Given the complexity of this subject and the scope of the overall law, a single post won’t cover the subject adequately.  In compiling my notes, research, etc., the logical approach is to address this subject in four posts;

  • The economic, social and political environment
  • The implications for providers
  • The implications for consumers/employers
  • The “best guess” of what happens next, post-the mandate delays, etc.

This first post, not to state the obvious, is focused on the economic, social and political environment that envelopes the legislation and is impacting its course.

Like the legislation or not or like or not its intent,  the ACA is a fascinating window into current social, economic and political realities.  It by its legislative intent, is a governmental attempt to address a number of social, political and economic factors within one large, overarching piece of law.

  • The rate of spending or expenditures relegated to healthcare in the U.S.
  • The cost of and access to, health insurance for a subset of individuals not covered or inadequately covered through traditional entitlement programs (current or former eligibility tests applicable) or traditional health plans (employer sponsored primarily).
  • The government’s role in assessing the adequacy and quality of provider programs.
  • Certain innovations deemed worthy of further exploration that in theory, will improve efficiency, care delivery and thus, quality as measured via outcomes.
  • The legislative mechanics to accomplish the above (authorizations, funding, delegation to various agencies, creation of other governmental entities for implementation and administration, etc.).

Structurally, the ACA is overlaid across existing governmental programs such as Medicare and Medicaid.  It does virtually nothing to change these programs, their benefits, their funding, etc. Arguably, the most the ACA does to these programs is fine-tune certain elements and add some subtle adjustments to payments and disclosure requirements for providers.  The most notable change within the ACA occurs within Medicaid as the ACA expands the definition (financial) of eligibility allowing people with greater financial means (up to 133% of the federal poverty limit effective in 2014) to participate in the program.

Politically, the need for the ACA was expressed (condensed) as an intervention to increase the number of people in the U.S. with health insurance coverage (reduce the number of uninsured) while simultaneously, “bending the cost curve” on Medicare and other entitlement programs (the rate of spending).  Both intents are laudable.  The latter may be somewhat attained but the cost curve bend, not and certainly, not as a result of the ACA.

The primary reason the ACA will have negligible impact or frankly, none at all in changing federal outlays for healthcare is that it doesn’t address, by legislative language or other, any specific funding and benefit elements of current entitlement programs, save to actually expand benefit eligibility (Medicaid).  It further ties the government to enhanced levels of funding in order to effectuate the expansion.  Additionally, the economic and social factors at play in the U.S. don’t coalesce around the legislation and in fact, are polar opposite to the legislation.

The driving elements of increasing expenditures, current and future, under Medicare and Medicaid are economic and social factors that can’t be adjusted by legislation.  Legislation or policy at its best can only respond to these factors via incentive and alignment but essentially, in the U.S., government fiat doesn’t work to adjust economic and social factors.  Our system of government and enterprise, even with greater regulation and oversight, can’t alter certain mercantile and social forces at play.  Principally;

  • An increasing percent of the population, even without changes to eligibility criteria, is eligible for federal entitlement benefits.  This is fundamentally the case for both programs – Medicare and Medicaid.  The aging population alone is the principal driver for increasing Medicare enrollment.  The economic shift in labor and payroll, an increasing driver for Medicaid eligibility.  These factors can’t be changed by policy unless the policy changes the eligibility in such a manner as to constrain growth.  The ACA did not do that.
  • The economy in the U.S. is in a period of adjustment and it has been now for the past twenty plus years.  This period is continuing and will for at least another twenty or thirty years.  The U.S. is no longer a production-based economy in the traditional sense; it is a consumptive, service based economy.  Economic activity is heavily influenced today by consumer behavior (consumptive) and as it has shifted toward an  employment locus in a service sector, the wage profile is different and lower than what was realized in the former production economy.  See the manufacturing industry as an example, particularly the assembly line style.  Today, the overall number of jobs are fewer, demand higher skills, and are slowly replaced by innovation and automation.  The fear is not overseas manufacturing usurping jobs but onshore technology advances eradicating jobs.  Manufacturing will remain a vital portion of the U.S. economy although not as relevant when viewed as a labor source in quantity.
  • Socially, we have come to expect government to be an arbiter in the distribution and production of health care and health benefits. We expect interventionist policy and the government to employ distributive justice for our care.  One only needs to look at the coverage breadth for government programs compared to private programs to see this evolution.  Gone are the days when private, employer sponsored plans can be considered “Cadillac” coverage compared to government entitlement programs.  Today, the inverse is true as employer plans have scaled options, imbedded greater increments of cost-share, and narrowed provider choices.  Oddly enough, the ACA is an evolved governmental effort to reach into the “private sector” and lay-over, a mandate for expanded coverage, benefits, and conditions – very similar to a government run, entitlement based infrastructure (e.g., no pre-existing condition limitations, no lifetime benefit caps, mandated coverage and benefit levels for group plans, etc.).  If government is, and I believe it is, a reflection or mirror if you will. of present-time, social expectations then one can readily conclude that the ACA exists because the dominant social trend current demands government intervention in health care.

Politics in the U.S. has evolved as well.  The political environment is about wins and losses in and across party divisions and sub-interest groups.  Broad consensus is rarely attainable on issues of substance.  The ACA evolved as a result of a point-in-time shift in central governance – a movement toward an ideological trend that government can and should be more involved in social imbalance.  The truth however is that the present wave of social imbalance, the slow decline of a “middle-class” isn’t fixable by government policy and redistribution.  This shift has occurred as a result of a changing world economy and in the opposite, government policy which hasn’t evolved.  In short, the change in social structure has arisen gradually, across multiple administrations and the trends have been present since the mid-70s.  Government can’t fix or legislate a re-balance.

In order to frame the life or death or evolution of the ACA going forward, the environmental factors of politics, economy and social expectations need dissection. For example, the political environment remains fractured so the likely remedy legislative is as we see today; subtle shifts around the edges, delays, and partial recalibration mostly coming via administrative rule-making and executive order rather than legislation.  While party balances in power may shift moderately, a ground-swell shift is unlikely – the electorate too disjointed and divided for this to occur.

Socially, the structures of society continue to shift.  People are more mobile.  Traditional jobs more scarce especially those with benefits.  Education is required but not necessarily in the form of traditional four-year degrees for many new and evolving jobs. The ability to earn a family supporting or for that matter self-supporting wage without special training or skills is eroding quickly, save for farming to a certain degree.  Wages will not inflate to any large degree for quite some time again, except in certain industries where scarce labor-skill is operative.  Child bearing occurs later and today, in rising numbers within single parent, non-intact couples. Saving rates remain low although personal debt levels have declined but this is likely temporary.  And finally, most individuals don’t view their income allocation toward health care as favorable and would prefer, a greater amount of their income be available for discretionary spending.  As long as this view, not supported economically, remains prevalent, the pressure on government to subsidize or create cheaper health care will remain high.

Economic trends and economies are changing and will continue to evolve for another decade plus.  This essentially means that labor-levels and employment levels are different and will remain different and thus, higher levels (historic) of unemployment, under-employment, income and non-participation will remain.  These factors cause governments to fund entitlements and support programs.  This will change over time as new sub-economies evolve and social structures adjust.  Expectations move and production shifts to balance a mixed demand for different services, goods, and commodities world-wide.  Today, the imbalance however is palpable as fossil fuel production has moved geographically, food production and distribution as well, and manufacturing re-structuring to a heavy industry third-world production and high-tech production and design residing in first-world countries  The U.S. economy will be different and thus so will be standards of living, valuations on real property, consumer behavior,, and credit and investing.  How this shapes the ACA going forward, I’ll delve into in the next series of posts.

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August 17, 2013 - Posted by | Policy and Politics - Federal, Uncategorized | , , , , , , , ,

2 Comments »

  1. … [Trackback]

    […] Informations on that Topic: rhislop3.com/2013/08/17/obamacareaca-where-it-is-at-why-and-where-next/ […]

    Trackback by URL | August 21, 2013 | Reply

  2. Great post. You stated your perspective on the economic and social factors very clearly. The last paragraph is tantalizing, can’t wait to read the next few posts.

    Comment by chris | August 31, 2013 | Reply


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