One thing that has become clear since the election of Donald Trump last week is that efforts to repeal or amend the Affordable Care Act (ACA) will be a high priority legislative item for next year’s Congress and the incoming Administration. But to have a better grasp of what the future of health care might look like under the Trump Administration, it is important to understand how the current healthcare landscape came to be. This first post in our blog series, Very Opaque to Slightly Transparent: Shedding Light on the Future of Healthcare, takes us on a brief stroll down memory lane of how and why the ACA became enacted, and how it has helped lead to the developments and trends we have seen in the healthcare industry.
The healthcare landscape prior to the enactment of the ACA was not entirely different to what it is today. As is the case now, a majority of Americans prior to the ACA secured healthcare coverage through their employers, while certain government programs, including Medicare, Medicaid and the Children’s Health Insurance Program (CHIP), provided coverage for seniors and certain poor adults and children. Nevertheless, many Americans grappled with certain inadequacies of the system in place at the time. Generally speaking, insurers had the ability in most states to deny coverage for those with pre-existing conditions, as well as the ability to stop coverage once individuals reached annual or lifetime limits. These practices made it extremely difficult for individuals with poor health histories to obtain adequate health insurance. Further, because Medicaid and CHIP only provided coverage to certain categories of low-asset people (e.g., children, pregnant women and people with disabilities), many Americans found themselves too poor to afford health insurance, but not poor enough or otherwise eligible to qualify for government healthcare benefits. All told, prior to the passage of the ACA, some
45 million Americans lacked health insurance, while tens of millions of others found themselves underinsured. Moreover, health insurance was getting more expensive while incomes for many middle- and low-income families failed to keep up.
Healthcare reform was a major topic during the presidential election of 2008, and following the election, it became a top legislative priority for President Obama and the Democratic-controlled 111th Congress. Many healthcare proposals were debated, ranging from a single-payor, Medicare-for-all-type system, to other more modest proposals, but when dust finally settled in March of 2010, what emerged and was signed into law was the ACA. While the ACA contains an enormous amount of provisions, there are certain core features aimed at addressing the aforementioned problems of the American healthcare system. For example:
- To help sicker patients obtain insurance, the ACA requires insurers to offer insurance to any applicant without looking into one’s underlying health status, and eliminates annual and lifetime coverage caps;
- To help insurers absorb the risk of taking on sicker patients, the ACA generally requires all individuals to obtain health insurance, and to assist with that, the law creates insurance marketplaces to purchase insurance and provides subsidies to help make insurance more affordable;
- The law also provides states with additional federal funding to expand their Medicaid programs to cover more individuals; and
- The law contains certain payment incentives to providers to develop systems of coordinated, high quality and efficient care to patients.
While the debate about the efficacy of the ACA continues amongst legislators, economists and healthcare policy analysts, in the years since the ACA’s enactment, there have been some striking developments in the American healthcare system. Some 20 million people have obtained health insurance through ACA programs, and the uninsured rate is now under 9% nationwide, a record low, and down from the 16% right before the passage of the ACA. And while the savings envisioned by many of the payment incentive provisions of the ACA have, by and large, yet to be realized, the industry has seen a large movement in recent years towards providers assuming global risk and investing in population health management. We have also seen a clear trend towards consolidation and convergence on both the payor side and the provider side in the shadow of the ACA.