Implementation and Ideology

by Reihan Salam

Consider the following from University of Chicago social policy scholar Harold Pollack, writing in The Nation:

We may also be wise to revisit just how minimal the most minimal insurance packages should be. In 2011, an Institute of Medicine committee was asked to clarify what the “essential health benefits” under the new law. The IOM recommended a package based on what the typical small business would cover, and noted the importance of such restraint to keep premiums low. It was a much more limited plan than many advocates support, and the committee was sharply criticized. But this month’s backlash underscores the wisdom of the IOM’s approach. I don’t know yet what can be done without compromising public health components such as substance abuse and mental health coverage, but these matters deserve a real look.

For liberals, these may be painful concessions. Yet this isn’t November 2008, when Democrats could plausibly look forward to imposing their legislative will. Democrats need Republican buy-in for health reform to secure public legitimacy and to help millions of needy people. Democrats also need the administrative capacity of state governments, willingly deployed, to make healthcare reform actually work. [Emphasis added]

Pollack references a post he wrote in December of 2011:

The Physicians for a National Health Program (PNHP) recently released a petition signed by 2,400 doctors. The letter protests the Institute of Medicine’s recommendations on Essential Benefits under the Affordable Care Act.

There are serious issues here. Progressive supporters of health reform disagree about how expansive the essential health benefit (EHB) should really be. An overly restrictive design will leave important therapies uncovered, as happens every day across America. Yet a package designed with too little emphasis on cost (either because too many marginal services are covered, or because prices grow too fast) would be disastrous. This will prove too costly, and thus unsustainable as a platform for near-universal coverage.

There’s no magic formula to balance the need for broad access to essential services with the need to maintain affordability and fiscal discipline.  Defining the EHB with due attention to clinical evidence and—yes—overall health value and cost-effectiveness, is crucial to the long-run success of health reform. This really has to work fiscally; there won’t be many second chances. [Emphasis added]

And he excerpted a passage from the IOM committee’s report:

Defining a premium target, which is a way to address the affordability issue, became a central tenet of the committee. Why the Secretary should take cost into account, both in defining the initial EHB package and in updating it, is straightforward: if cost is not taken into account, the EHB package becomes increasingly expensive, and individuals and small businesses will find it increasingly unaffordable. If this occurs, the principal reason for the ACA—enabling people to purchase health insurance, and covering more of the population—will not be met. At an even more fundamental level, health benefits are a resource and no resource is unlimited. Defining a premium target in conjunction with developing the EHB package simply acknowledges this fundamental reality. How to take cost into account became a major task. The committee’s solution in the determination of the initial EHB package is to tie the package to what small employers would have paid, on average, for their current packages of benefits in 2014, the first year the ACA will apply to insurance purchases in and out of the exchanges. This “premium target” should be updated annually, based on medical inflation. Since, however, this does little to stem health care cost increases, and since the committee did not believe the DHHS Secretary had the authority to mandate premium (or other cost) targets, the committee recommends a concerted and expeditious attempt by all stakeholders to address the problem of health care cost inflation. [Emphasis added]

Had the Obama administration embraced the IOM committee’s approach, it is possible that the Affordable Care Act would be in much better shape. So why wasn’t the IOM committee’s approach embraced? Ideological commitments seem to have played a role. Harvard economist David Cutler’s May of 2010 memo to Larry Summers on health reform implementation offers insight into the thinking of key members of the implementation effort:

The overall head of implementation inside HHS, Jeanne Lambrew, is known for her knowledge of Congress, her commitment to the poor, and her mistrust of insurance companies. She is not known for operational ability, knowledge of delivery systems, or facilitating widespread change. Thus, it is not surprising that delivery system reform, provider outreach, and exchange administration are receiving little attention. Further, the fact that Jeanne and people like her cannot get along with other people in the Administration means that the opportunities for collaborative engagement are limited, areas of great importance are not addressed, and valuable problem solving time is wasted on internal fights.

Elsewhere, Cutler observes that running insurance exchanges is a “collaborative process,” which requires officials who can work effectively with a wide range of stakeholders:

As just one example, the person who ran the Commonwealth Connector in Massachusetts estimates that he had 500 town meetings to discuss reform, the equivalent of 17,000 meetings nationally – and this was in a state where two-thirds of people, along with insurance companies, supported reform. The person newly appointed to head the insurance oversight office has a reputation as an insurance bulldog, not a skilled facilitator. Remember that most people will get their information about reform from their doctor and their insurance agent. If you cannot find a way to work with hesitant states and insurers, reform will blow up. I have seen no indication that HHS even realizes this, let alone is acting on it.

Had the Obama administration recruited officials known for their operational ability, knowledge of delivery systems, and experience in facilitating widespread change, it is at least possible that they might have been more amenable to defining the initial EHB package with cost uppermost in mind, and that this might have reduced the disruption of existing health insurance arrangements. But though the White House did manage to recruit many well-regarded academics and some veterans of the business world, the skills Cutler considered essential were in short supply.

The Obamacare rollout is a cautionary tale not just for Democrats. Republicans can learn from the experience as well. Any future GOP presidential administration will draw on a network of professionals with strong ideological commitments, not all of whom will have long experience of facilitating widespread change in the public sector. Identifying and attracting such professionals is thus a high priority, and it has arguably been made more difficult by the various ways (e.g., the shutdown) in which the right has alienated academics, corporate executives, and other constituencies that are, for better or for worse, a key source of the expertise and experience modern governments need.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.