Historians will look back on the debate over Obamacare since its enactment and wonder, why all the fuss? They’d understand, of course, that Republicans weren’t part of the final legislative compromise, so it is no surprise that every bump in the road sent the debate veering into partisan warfare. But history may well show that in terms of real differences over health policy, the fight was much ado about nothing.
Given these similarities, the sooner policymakers can acknowledge that the ACA and Medicare Part D have the same policy DNA, the sooner they can get to the biggest challenge of health care reform – controlling costs. Despite a recent slow down in cost growth, health care will consume more than one every five dollars in the U.S. economy starting in 2023 under current projections. Numerous studies show that one-third of every care dollar or more is wasted on care that does not improve patient’s health.
Here are three fundamental similarities between the ACA and Part D that should form a common understanding for moving forward on health policy:
Subsidies for buying coverage.
Both the ACA and Part D are centered on a single idea that has dominated the policy-making of both parties since 2000: public subsidies for private coverage.
Under the ACA, certain individuals shopping for health coverage receive a government subsidy to help them buy private insurance. The size of the subsidy depends on a person’s income, starting at 100% and phasing down to 0% for people earning four times the poverty threshold.
In Part D, Medicare beneficiaries also receive a subsidy, which covers three-fourths of the cost of a “standard” plan. Beneficiaries use this subsidy to choose prescription drug coverage from competing private health plans. They, too, have to pay more if they have higher incomes.
Protections to maintain a stable marketplace.
Both the ACA and Part D created new marketplaces and mechanisms to ensure their stability.. Given the uncertainties over who would sign up, both laws provide compensation to health plans that end up enrolling a larger share of sicker, more costly patients. Under the ACA, health plans with healthier enrollees compensate plans that end up losing money due to enrollees who are sicker on average. The money is transferred among plans on a budget-neutral basis through two government programs called “risk corridors” and “reinsurance.” These programs mitigate some of the risk of participating in an untested market.
Like the ACA, Part D has an individual penalty to encourage healthy people to enroll before they get sick. For every year that Medicare beneficiaries delay enrollment, their premiums jump to a higher level that must be paid for the rest of that beneficiary’s life. While Part D doesn’t use the tax code to enforce its penalties, as does the ACA, the conceptual underpinnings are essentially the same.
Part D, however, uses a similar cost control technique. Part D plans use narrow networks of pharmacists to save money for beneficiaries who agree to use specific pharmacies. And now, under a proposed rule from the Obama Administration Part D, health plans with narrow pharmacy networks (also called preferred networks) would no longer be able to control which pharmacists were in their network. Not only does this new rule put Part D’s lower costs at risk, the Administration no longer has a consistent stance on the use of this important cost control technique in the ACA.
Another sign of the return of productive health care policy debate is the bipartisan, bicameral agreement on the doc fix. It would replace the automatic annual cuts in doctor payments with a series of incentives to encourage less costly health care delivery. Although there’s a dispute over paying for $150 billion cost of the doc fix, the agreement itself is a sign of the common interest the parties have in cost control..
For both political parties, the benefits of finding and acknowledging their common offspring on health care policy will yield benefits for cost control. For Democrats, that means being able to afford commitments to finance health care coverage in Medicare, Medicaid, and the ACA. For Republicans, it means less pressure to increase taxes. And for everyone, it means a stronger fiscal health for the nation.
It may still take a while for the partisan fight over the ACA to die down, but the time will come soon when the need to fight health care costs will be stronger than scoring political points over policies the two parties actually agree upon. In the meantime, Democrats will have to continue to defend the ACA and the political center they have claimed on the ACA just as Republicans have done on Medicare Part D.
David Kendall is Senior Fellow for Health and Fiscal Policy at Third Way, a think tank based in Washington, D.C. Follow: @DavidBKendall
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