Obama Pushes Public Option in JAMA

July 12, 2016

UPDATED July 13, 2016 // If Hillary Clinton wants to cite support for her proposal to add a public option to health insurance exchanges, she can refer to an article in the Journal of the American Medical Association (JAMA) by a certain attorney in Washington, DC.

The author happens to be President Barack Obama, who took the liberty not only to put the initials "JD" after his byline but also to review the results of his signature legislation, the Affordable Care Act (ACA) and propose the next steps in healthcare reform. In his JAMA piece, published online yesterday, Obama said Congress should reconsider offering Americans the choice of a government-sponsored insurance plan along with private ones on some of the exchanges established by the ACA.

Democratic lawmakers who drafted the ACA originally built in a public option but eventually removed it to placate conservatives who feared that a government plan would enjoy undue competitive advantages and force private insurers out of business. They argued it would be equivalent to socialized medicine.

Clinton, the presumptive Democratic presidential nominee this fall, recently came out in favor of adding a public option to the ACA, which her likely Republican opponent, Donald Trump, wants to repeal.

Not a Solution, but a New Problem, Says One Critic

Competition among private health plans on some exchanges is not as robust as ACA supporters would like, partly because several insurers, such as UnitedHealthcare, have pulled out, claiming financial losses. Obama did not mention this troubling trend in his JAMA piece but noted that "some parts of the country have struggled with limited insurance market competition for many years," which explains why healthcare reformers considered the public option at the outset. Twelve percent of exchange plan enrollees, he said, live where there are only one or two issuers of private plans.

"I think Congress should revisit a public plan to compete alongside private insurers in areas…where competition is limited," Obama writes. Besides giving consumers more affordable options, a public option could save the government money because public programs such as Medicare often outperform private plans financially by "curtailing administrative overhead and securing better prices from providers."

One healthcare economist counters that the public option would only compound design flaws in the exchanges that discourage private insurers from participating.

Joseph Antos, PhD, a healthcare policy analyst with the conservative-leaning American Enterprise Institute, told Medscape Medical News that private insurers in the exchanges have lost money largely because they have to charge young adults too much in premiums and older adults too little. In addition, the penalty for not obtaining insurance coverage has proved to be a weak motivator for the young and healthy. The net effect is that not enough young adults enroll in the exchanges to subsidize older adults, who account for most of the medical spending, according to Dr Antos.

Instead of remedying this problem, the public option would "create a new problem by imposing another set of government rules," said Dr Antos, who has held senior positions with the Department of Health and Human Services, the Congressional Budget Office, and other government agencies.

"This is the age-old theory that the government knows how to start a business," he said, referring to a government-created health plan. "It is proven at every level that the government is really terrible at starting businesses."

Pharmaceutical Companies Faulted for High Costs

The president's article in JAMA highlights another issue in this year's presidential campaign — the high cost of prescription drugs. Clinton has taken up that fight, stating on her campaign website that she wants to "hold drug companies accountable so they get ahead by investing in research, not jacking up costs."

In his JAMA article, Obama faults the pharmaceutical industry for opposing "any change to drug pricing, no matter how justifiable and modest because they believe it threatens their profits." Some of the changes he'd like Congress to support include the following:

  • Increasing transparency around manufacturers' actual production and development costs;

  • Increasing rebates that manufacturers must pay for drugs prescribed to certain Medicare and Medicaid beneficiaries; and

  • Giving the federal government the authority to negotiate prices for certain high-priced drugs.

A spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA) disagrees with the president's stance.

"Focusing on the share of healthcare spending going towards lifesaving treatments instead of looking at delivering greater value across the system is short-sighted," said Holly Campbell, a senior communications director at PhRMA. Campbell told Medscape Medical News that the nation can address drug costs "holistically" by, among other things, modernizing the drug discovery and development process, promoting value-driven healthcare, and "empowering and engaging consumers."

Reviews of the President's Review

Obama writes in JAMA that although the job of healthcare reform is far from over, the ACA has made substantial progress "toward a more affordable, high-quality and accessible healthcare system." His evidence, some highlighted here, is gleaned from publicly available government and industry data, including estimates and projections, published research, and hospital readmission data from the Centers for Medicare & Medicaid Services.

  • The uninsured rate declined by 43%, from 16% in 2010 to 9.1% in 2015.

  • The share of nonelderly adults who could not afford care decreased by 5.5 percentage points from the debut of the exchanges in 2014 through early 2015.

  • Thirty percent of traditional Medicare payments now flow through alterative payment models that hold hospitals and doctors accountable for outcomes.

  • Average annual Medicare spending per enrollee shrank between zero and 1% from 2010 through 2014, after growing 2.4% the previous 4 years.

Obama writes that this progress occurred "in the face of hyperpartisanship," which took the form of more than 60 attempts by congressional Republicans to repeal all or parts of the ACA, as well as "inadequate funding, opposition to routine technical corrections, excessive oversight, and relentless litigation."

The progress came alongside missteps and revisions. The president notes that his administration abandoned a voluntary, long-term care program created by the ACA because it did not work. And when initial glitches in the Healthcare.gov website made it torturous to enroll in an exchange plan, "we brought in reinforcements, were brutally honest in assessing problems, and worked relentlessly to get it operating."

Obama's review of the ACA in turn was reviewed in four editorials in JAMA. Stuart Butler, PhD, a senior fellow in economic studies at the Brookings Institution, Washington, DC, credits the ACA with better care and greater financial security for millions of previously uninsured Americans. However, Dr Butler writes that Obama is "unduly sanguine about the future of healthcare costs" and that the recent slowdown in their growth may reflect the Great Recession just as much as it does the ACA. To control Medicare costs in the future, he recommends the drastic remedy of a premium support system, whereby the government provides beneficiaries a subsidy that they can spend on a private health plan of their choice.

Meanwhile, in their commentary, Jonathan Skinner, PhD, and Amitabh Chandra, PhD, voice the familiar criticism that extending insurance coverage to more Americans "may not automatically result in improvement in health when healthcare systems are fragmented and inefficient." For example, they point to state Medicaid programs with low payment rates and narrow networks that make it hard to find a willing physician. Nevertheless, the ACA is "far more moderate, innovative — and difficult to replace — than its critics claim," write Dr Skinner, an economics professor at Dartmouth College, Hanover, New Hampshire, and Dr Chandra, a professor of social policy at Harvard University, Boston, Massachusetts.

JAMA Editor-in-Chief Howard Bauchner, MD, takes a long view on the ACA, particularly when it comes to moving the needle on health outcomes, which he says won't happen immediately. Improved access and lower hospital readmission "are not true health outcomes, but rather reflect measures of processes of care," writes Dr Bauchner in his editorial. "The great gains related to the ACA — if they are to be realized — are in the future."

Perhaps predictably, Peter Orszag, PhD, Obama's former director of the Office of Management and Budget, is more generous in his assessment of what the ACA has wrought. Writes Dr Orszag: "In sum, the US healthcare reform glass is more than half full."

JAMA. Published online July 11, 2016. Article full text Butler editorial Skinner and Chandra editorial Bauchner editorial Orszag editorial

Follow Robert Lowes on Twitter. @LowesRobert

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