Antos on Why 'President Romney' Might Keep Parts of ACA

Eli Y. Adashi, MD, MS, CPE; Joseph R. Antos, PhD


May 29, 2012

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Editor's Note:

In this segment of Medscape One-on-One, health economist Joseph R. Antos, PhD, of the American Enterprise Institute, talks about healthcare under a President Romney, reforming Medicare, funding the ACA, and more.


Eli Y. Adashi, MD, MS, CPE: Hello. I am Eli Adashi, Professor of Medical Science at Brown University and host of Medscape One-on-One. Joining me today is Dr. Joe Antos, the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute. Welcome.

Joseph R. Antos, PhD: Thank you.

The ACA on Trial

Dr. Adashi: Beginning with the obvious, how would you sum up the recent 3-day hearings of the US Supreme Court on the future of the Affordable Care Act (ACA)?

Dr. Antos: The best single word is "uncertain." We do know that sometimes, though not all the time, the oral argument stage of the trial is done to test the various sides of the issue and not necessarily to reveal what the justices actually have in mind. I don't think that was the case generally for this momentous decision that's about to be made. For example, Justice Kennedy, who is often considered to be the swing vote, made an observation on the second day of oral arguments about the mandate raising the concern about changing the fundamental relationship between the people and the government. That had to be something that was from the heart, from the mind. It doesn't tell you which way he is leaning. But it indicates a concern.

How Might the Supreme Court Rule?

Dr. Adashi: It is impossible to predict the outcome, but as a seasoned observer of healthcare in this nation, you must have formulated certain scenarios as to how this might go. Could you share with us just a few thoughts about potential directions that this case might take depending on potential outcomes?

Dr. Antos: We can dispose of the 2 extremes right off the bat. If the Supreme Court basically says that everything is all right, then what happens in the future depends on the election. If President Obama is reelected, then things will move along. I won't say that they will go according to the plan laid out in the ACA because the timing is too short and the expectations are too great; things will change. That's true for all legislation, but this is especially the case for the ACA.

The other possibility, which I think is not at all likely, is that the Supreme Court would throw the whole law out. But to me, the most likely possibilities are to remove the mandate or to remove Title 1. Title 1 is the part of the law that deals with insurance for the under-65 population. The individual mandate has zero impact on the Medicare program, zero impact on the Medicaid program. It really is a law or a provision that is required of people in between the ages of 0 and 64.

If the mandate goes and everything else remains as it is, then we're going to have an interesting and difficult time. The insurance industry would like you to believe -- and they're not unjustified in this -- that without the individual mandate, the insurance market will collapse.

There are 2 other issues aside from the individual mandate: guaranteed issue and community rating. Guarantee issue means that if you want insurance, it has to be offered to you; you can buy it. And you can buy it without any consideration for your current physical condition. That means that preexisting conditions would not count against you. The community rating part of it has to do with what insurers can charge, and in that case it's really more a matter of, can they charge more for people who will predictably use more benefits? The answer is no. If you can't charge more as a business to people who use your services more, then that's not a smart business model. That isn't going to work. And the insurers are right. Without some strong encouragement, you'll have people realizing that they can buy insurance anytime without a penalty.

Think about young people who don't like to buy insurance now. They're paying off their cars, they're paying off school loans, and, in this economy, many don't have jobs, which means they don't have the money to buy insurance anyway. But they're not inclined. They're healthy. They don't think about it. My own children went through that phase. They're not going to buy insurance unless there's a real pressure on them to do so. The fact is that the mandate doesn't apply that pressure. The politicians who support the mandate want you to believe that the word "mandate" by itself is enough. But that's not true because there are no teeth in the mandate.

In 2014, the penalty for not buying health insurance is a whopping $95. It will rise to the stratospheric height of $650 or $700, somewhere in there. That's per year. How does that compare to the thousands of dollars it costs to buy health insurance? If you're young, healthy, and know you can put it off, why wouldn't you?

There's also no penalty if you don't buy insurance right away. If you wait a couple of years and then buy it, your premiums cannot be increased because you failed to follow through as the law wanted you to. If you drop your insurance for a while because you can’t afford it, or you lost your job, that's a legitimate reason and your premiums should not go up when you finally do buy insurance. But if you don't buy it because you don't feel like paying for it this year, that’s not really a legitimate reason and yet, under the current law, you have the same protections as people who don’t buy it because they can’t afford it.

Dr. Adashi: You're saying that even if the individual mandate were ruled unconstitutional by the Supreme Court, it's not the end of the world because the provision is not enforceable given the current economic incentives and disincentives to comply with it. In which case, whether the individual mandate stays or goes, the post-Supreme Court president is going to have to deal with it.

Dr. Antos: Exactly, including President Obama. One of the big legal arguments has to do with so-called severability of the individual mandate. The peculiar aspect of the ACA is that it doesn't have a passage that says, "If any individual provision in this body of law is declared unconstitutional or made ineffective in some way, the rest of it stands." It's unusual because virtually every other law passed by Congress has this passage. The passage was in the Senate Finance Committee version of the law. It was taken out in the version that the Senate passed. I think the reason for that was that members of Congress, not understanding what their own provision did, came to the conclusion that you couldn't have guaranteed issue and community rating insurance regulations without a mandate.

How Much Will the ACA Cost?

Dr. Adashi: Speaking of the ACA, there has been a recent debate, or perhaps the reigniting of an older debate, on how much the bill will cost. Will it live within its projected budget? Will it cost less or, as the Congressional Budget Office (CBO) has recently suggested, may it in fact cost more? As someone who worked at the CBO at some point and continues to advise the CBO at this time, where do you see the issues? It's hard for the noninformed provider out there to firmly distinguish between these different scenarios.

Dr. Antos The truth can't be established, but the speculation certainly can be. In terms of budget scoring, one thing that everyone should keep in mind, and I say this with all due respect to the CBO -- I'm a graduate, I enjoyed working there, and I think that they fulfill a very important place in the legislative process -- but the fact is that they're not fortune-tellers. Economists are not fortune-tellers. If I were, I wouldn't be sitting here talking with you. I'd be sitting at the beach in my billion-dollar mansion. The fact is that economists are not necessarily very good at projecting the costs of especially complicated legislation such as this.

There are a lot of things in this legislation that have never been tried before, either individually or in one full package. And so I think this whole question of what CBO's score was several years ago and what's happening in the future is a somewhat sterile discussion. What's much more interesting is how the housing sector will react. That really determines not just the true cost, but also what happens to patients, physicians, and other providers.

Dr. Adashi: Well said. I suppose another way of looking at this is to say that such exclamations or reports are probably then subjected to political ends by whoever the interested party may be, but, as you say, they really do not serve a constructive purpose.

Dr. Antos: We should be concerned about the cost of anything, and if we see costs in any program rising beyond what the social and political consensus would have, then we would hope that Congress would take action. But we would be disappointed in most cases.

The Future of Medicare Financing

Dr. Adashi: Let's turn to another perennial challenge, the financing of Medicare, which you have written about extensively over the years. The future vision of the financing of Medicare is articulated on one hand by the ACA and the Obama administration and on the other hand by the 2 budget proposals, one this year and one last year, from Congressman Paul Ryan. Could you say a few words about how those 2 visions compare and contrast, the strengths and weaknesses that you see in either, and then take us through the process by which some of this may someday resolve?

Dr. Antos: How many hours do we have? Let's first consider the president's position on Medicare, which is really contained in the ACA. He put out a budget this year. All presidents put out a budget every single year. The budget, by the way, in this case is a political document. It's not the same as a household budget. It doesn't mean that we're going to live by it. What we live by is what Congress ultimately passes. So the budget really is a blueprint; it's a request.

Dr. Adashi: It needs to be approved by Congress.

Dr. Antos: Except that it never is. I don't believe that, in the history of budgeting, any president's budget has ever been simply taken as a whole. That's a completely unrealistic prospect. What does the president have in mind? Well, he has in mind the same kind of policies that we've had in Medicare for decades, really since almost the beginning, which is that if you see Medicare expanding or rising too rapidly, then Congress will make cuts in provider payment rates.

There are some new wrinkles, of course, but the new wrinkles aren't very well worked out, and they're going to take some time. A lot of these new wrinkles make sense to me. The idea, for example, of bundled payment: It's a great concept. I suspect that, right now, many of the viewers are saying, "What do you mean, 'It's a great concept'?" What I mean is that it isn't worked out, and there are all sorts of problems, but the idea of paying a relatively fixed amount for all the things that go on in the hospital, including physician services, could potentially encourage hospitals and doctors to cooperate more thoroughly and eliminate some things that don't need to be done under the rubric of greater efficiency.

There's another risk, however: cutting prices. When you cut prices, what do you get? Potentially, if you cut deep enough, you will discourage providers from participating in the program. Politicians want us to believe that that would never happen, but if we were really talking about implementing the cuts in the ACA, we're talking about driving Medicare payment rates down very quickly to Medicaid rates and never rising above that. The only reason it would never go below Medicaid rates is that there is a law that says Medicare can't pay below Medicaid.

Is that a practical way to proceed? I don't believe the answer to that is yes. I think we've seen over time with this sustainable growth rate for physicians that if there's the prospect of making really huge cuts in provider payments, Congress is going to blink. Congress is going to say, "No, that's too much." They've done that for 8 or 9 years in a row with this sustainable growth rate (SGR). There's no prospect that they will fail this year to kick the SGR can down the road, but there's also very little prospect that they'll resolve that problem anytime soon.

People talk about the Independent Payment Advisory Board, the IPAB. We could argue a little bit among friends about whether that is really a new thing or not, but the fact is that their tool for reducing Medicare costs is reducing payments to providers. That's largely it.

Support for the Ryan Medicare Proposal

Dr. Antos: The other alternative, as articulated best by US Representative Paul Ryan, is called "premium support." The idea for premium support has been around for many, many years, and it is basically putting Medicare on a budget. It's another way to bring the growth rate of Medicare spending under control by reducing spending. People criticize it, arguing incorrectly that this will impose huge costs on your mother. Well, most mothers live on fixed incomes. It was true in 1965. It's true today. The vast majority of people who are over 65 are living on Social Security. They may have a pension, but there's no prospect that they're going to get a sudden increase in payments just because their costs go up.

What does premium support really do? Does it really force senior citizens to pay another $6000 for Medicare? That's one interpretation, but a more sensible interpretation is that our parents don't have the $6000, so it's really a message to providers saying, "Here's a budget. And guess what? You won't be going back to your patients and getting thousands of dollars more because they don't have it." So there's a difference in philosophy. One philosophy is the president's approach, which is a more centralized approach; it's the approach we have used since 1966. It hasn't worked very well. The other one says, essentially, "Let's put the program on a budget, but let's not try to guess what specialist physician services should be compared with home health services, making the most ridiculous comparison possible. Let the health plans work that out. Let's have the negotiations continue between the patient and the physician about what should happen." And what everybody says, both Democrats and Republicans, is that patients and physicians should have better information about what they're doing, what it costs, and what the consequences might be.

Debt Limits, Insurance Exchanges, and Medicaid Expansion

Dr. Adashi: Is there any prospect that some of this will be resolved before the election or after the Supreme Court has spoken, or at any other point in the foreseeable future?

Dr. Antos: I do think that we will see some resolutions. Obviously, the Supreme Court will settle some minds about certain things. If [they decide in favor of] what I think are the 2 most likely scenarios, either throwing out the individual mandate or throwing out all of the under-65 insurance provisions, that would throw it back to Congress to figure out what they really wanted you to do. Unfortunately, as I think everyone knows, the political climate has deteriorated -- not just over the last 4 years, but it has steadily deteriorated for about the last decade. I think it's highly unlikely without some other force -- and I'm about to say what that other force is -- for Congress to reach agreement on the problems associated with the ACA.

What is that other force? Debt limit. You may remember that last August Congress passed something called the Budget Control Act. The word "control" was a misnomer. Like most things that Congress passes, there's usually one word that's wrong, and that's the word that was wrong. The net result of that was that there was supposed to be a deal made between cutting spending and raising the debt limit, raising the government's ability to borrow. We need to be able to borrow. The Medicare program needs to be able to borrow.

Basically, the government can't operate solely on the funds that come in through taxes, and this is not just an issue because of the slow economy. It's a bigger issue, but it's always been the case, so we need to be able to borrow to keep our programs going. The deal made with the Budget Control Act was to raise the debt limit and cut the spending. What happened? The debt went up almost immediately and the spending cut remains to be seen. If the cut really happens, it will space itself out over the next 9 years or so.

If we're lucky, the debt limit will not be reached again until sometime early next year. Some predictions have it that we're actually going to bang into the debt ceiling again, possibly around election time. If that's the case, I have no doubt that Congress will do what they've done with physician payment. They'll pass something in the lame-duck session that gets them through a few months so that they can actually negotiate with the new Congress, not the old Congress, and the new president. And by the new president, I also include President Obama. A second term makes you a new president; there's no doubt about it -- your perspectives change.

We will have this enormous fiscal pressure that cannot be delayed and will have to be dealt with. Unlike last year, both Democrats and Republicans will realize that making a deal where we raise the debt limit now and wait a long time for cuts just doesn't work out very well from the fiscal prudence standpoint. I think what will happen is a really brutal battle. The net result will be that if it's President Obama, he will have to find very large savings. They'll have to be real. Parts of the ACA are clearly going to be on the chopping block. He will say publicly that he's against it, but privately he will make a deal. And here's the thing: Not only does he need the cuts to raise the debt limit, but also there's practical reality. For example, even the states that really want to put health insurance exchanges into place are having trouble, and they need to be in place -- not in 2014; they need to be in place and fully operable by June 2013.

The regulations that the federal government has to issue to give insurers guidance on what insurance exchanges can and can't offer haven't been issued yet. That regulation has to be finalized because insurers have a lot to lose, both financially and legally, if they misinterpret the intention of the regulation. Basically, what we have here is the usual problem in Washington: With anything complicated, they say, "We want it right away." But, of course, reality eventually intrudes. I think reality will intrude, and I think the president would reluctantly accept 2 changes: One is to delay the insurance exchanges to 2015, which is really probably not enough time, but it helps.

Then, they should reduce the Medicaid expansion from 133% of poverty to 100% of poverty. The states all said they could live with that. That actually saves money in a budgetary sense. That would be a very sensible package of compromises that second-term President Obama could make if he has to, if the pressure is on him (and I think it will be).

How Would Healthcare Look Under President Romney?

Dr. Adashi: Before we conclude, I will force you yet again into the fortune-teller position by asking you, to the extent that you can tell, what healthcare would look like under President Romney if he were to be elected.

Dr. Antos: Well, one of the things he's said is that he believes in state experimentation. Of course, he's proven it in Massachusetts. If he were elected, that would also presuppose that the Republicans would hold their majority in the House, and they'll get a few more seats in the Senate; they may have the majority in the Senate under that scenario. I don't think anyone will have 60 votes, so the Senate will still be a tough call for anybody. But the ACA did something. It's already done it, right? And it's not so much that the government did it. It sort of opened the spigot so that health plans, provider groups, and employers have all taken some sort of an action in terms of health reform. Many of the states have as well. With a lot of those things, you're not going to put the genie back in the bottle.

Although Mitt Romney -- for good, sound political reasons -- is saying that he's going to repeal the ACA on day 1, the reality is that a lot of what we've seen transpire under the health act will continue to go on, but a lot of the big spending parts of it will be rethought.

It doesn't mean that we won't have big spending. Of course we will. We have it now even before 2014, but I think that it will be rethought, and there will be an attempt to reform the private insurance market in sensible ways. That would mean not eliminating insurance underwriting altogether, which is what the insurance reforms did under the ACA. I think what it means is that you have some reasonable regulations so that underwriting actually works in a positive way. Penalize people by making them pay a higher premium if they don't, without good reason, maintain their coverage. That's the most sensible thing in the world. Democratic analysts and Republican analysts have basically agreed that that would make sense and that we should just do it.

There are a bunch of those kinds of changes that would occur under Romney. I strongly suspect that the Medicaid expansion to 100% of poverty would probably stick. I'm certain that big cuts in provider payments in Medicare will stick because, bluntly, we don't have another fiscal tool. But under Romney, we would see over the course of his first 4 years whether we could make some progress politically on the Hill and socially in terms of people understanding what their alternatives really are. They're not great in the Medicare program, but I could see us making considerable headway towards a sensible premium support-style program.


Dr. Adashi: If nothing else, President Romney and candidate Romney are not one and the same, as has been true for many of his predecessors. If I may close on a personal note, I have made the observation that you started your career in the US Department of Labor. After that, you've dedicated much of your energies to the study of healthcare economics, healthcare policy, and related matters. If you could, please trace the seminal events that were responsible for this career choice and made you become interested in what is probably one of the signature issues of our time.

Dr. Antos: When I started my career, there was no such thing as health economics. Health policy was not an issue that you studied at any level, undergraduate or graduate. It really didn't exist as an academic discipline. I think the first health economists were in fact labor economists. I like to think of us as having been saved. It's a religious conversion, almost. But, in fact, I was in the Office of Management and Budget. I had the opportunity to move over across the street to the President's Council of Economic Advisers.

Dr. Adashi: This was during which administration?

Dr. Antos: This was in the Reagan administration. I was not a political appointee. I've never been a political appointee.

Dr. Adashi: And who was Reagan's Director of the Office of Management and Budget?

Dr. Antos: David Stockman. He was a great director. His goal was to know more about the little details of the budget than the budget examiners who studied them on a daily basis. And he often beat them at the intellectual game, kept everybody on their toes. But I was invited to go over to the Council of Economic Advisers. I went over there during what turned out to be August vacation. I was the only one in the office. The phone rang, and it was someone who introduced me to the concept of catastrophic health insurance and Medicare. That is really how I got my start. This was someone who eventually became an official in the Department of Health and Human Services (HHS), who worked for Dr. Otis Bowen, who became Secretary of HHS towards the second part of Reagan's presidency. He said to me, "I've got this paper. Would you mind reading it?" He sent it to me. I didn't know him; I didn't know Otis Bowen from the man in the moon. I read the paper and I called him back and said, "Well, it's a pretty good paper but you have a few issues." And for some reason, my skepticism made an impression. I just got sucked in more and more and more. You could say that I've had a highly unsuccessful career. I was one of the leaders of the first attempt to add a drug benefit in catastrophic health insurance to Medicare. That failed in the '80s. I argued against the way we pay physicians, lost that one too, and so on. It's been quite a career.

Dr. Adashi: Thank you very much for sharing that with us. On this note, sincere thanks to Dr. Joe Antos and to you, our viewers, for joining Medscape: One-on-One. Until next time, I am Eli Adashi.