Three years later Obamacare is looking better and better

President Obama's critics on both the left and right have taken issue with the fact that he prioritized health care reform so early in his administration. Those on the left claim that it was a distraction from the single most important priority at the time...stimulus and jobs. What that critique fails to address is that the President had just passed the largest stimulus in our nation's history and there was no way further action on that front was likely to occur at the time. It also fails to recognize that - in addition to the recession - both businesses and individuals were being bankrupted by the status quo with regards to health care.

On the right, the criticism mostly centered around the idea of taking on the costs of a whole new government entitlement program in the midst of a recession. No matter what the CBO said, these folks continued their denial about Obamacare actually REDUCING the deficit.

The truth is that when faced with that status quo on health care/health insurance, there were two issues that needed to be addressed...access and cost.  What we heard most about during the health care reform debate and since its passage has focused on the issue of access. Obamacare included things like the individual mandate, subsidies, expansion of Medicaid and the elimination of both denials for pre-existing conditions and lifetime caps on spending. All of these directly addressed the issue of access.

On the issue of cost control, Obamacare took a slower and more experimental approach. One of the reasons for that is because the focus was not so much on reducing spending as it was in reforming how health care is provided. Here's Ezra Klein explaining the difference.

Cutting health-care costs is hard. And it needs to be distinguished from simply capping spending. When liberals say that single-payer will save a bazillion dollars, or conservatives point to Paul Ryan's plan and say that will save a bazillion dollars, they're talking about capping spending. Liberals do it on the provider side, saying that government will only pay so much for medical services people need, and the system will just have to adjust. Conservatives do it on the consumer side, saying that government will only give individuals so much for the coverage they need, and if that proves insufficient, then tough. But voters haven't evinced much appetite for either proposal.

So smart people have spent the past few decades trying to figure out softer ways to cut costs without cutting things that people need...

The problem, of course, is that no one knows how well this stuff will work. So the legislation is careful in implementation...It tries a lot of different things on a fairly small scale in the hopes that some of them will pan out (hence the legislation's length).

In that article, Klein links to an op-ed by David Cutler who is a professor of economics at Harvard and was the senior health care advisor to the 2008 Obama campaign.  In it Cutler outlined the thinking at the time on 10 potential cost control ideas:

1. Form insurance exchanges
2. Reduce excessive prices, ie, Medicare Advantage
3. Move to a value-based payment in Medicare
4. Tax generous insurance plans
5. Empower an independent Medicare advisory board
6. Combat Medicare fraud and abuse
7. Malpractice reform
8. Invest in information technology
9. Prevention
10. Create a public option

Cutler's conclusion:

So reform [ie, Obamacare] gets full credit on six of the 10 ideas, partial credit on three others, and no credit on one. The area of no credit (a public option) is because Republicans opposed the idea. One area receives only partial credit because of Democratic opposition (malpractice reform) and two other areas reflect general hesitancy to increase taxes.

I'd add an additional cost control measure that wasn't mentioned because it relates more to insurance than spending - the medical loss ratio that requires insurance companies to re-imburse customers if they spend less than 80-85% of premiums on direct medical care.

Of all of those included, most have only been partially implemented at this point and 3 of the most significant haven't begun at all (exchanges, tax on generous plans, and the Medicare advisory board). And yet the big news this week that you won't be hearing about from Republicans is that decreasing health care costs could close the budget gap. As I've noted previously, this might be why President Obama seems more willing lately to walk away from a grand bargain.

When Obamacare initially passed, there wasn't enough solid evidence about whether or not these experiments would have an effect on controlling the costs of health care. That's why we didn't hear much about them. But so far the real-life experience of implementation looks pretty good.