What would it take to make the ACA more affordable?

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Liz Wroe is a principal at Leavitt Partners DC office and former Senate health policy director. Liz talks about the evolution of the Affordable Care Act (ACA), sharing her experiences during the ACA’s passage, repeal efforts, and stabilization of the individual market. She discusses challenges in bending the cost curve, the impact of ACA subsidies and silver loading, and the need for more honest conversations in healthcare policy.

Jennifer Colamonico: Welcome to HMA's vital viewpoints on healthcare, concise conversations with experts that identify practical solutions to make healthcare and human services work better. I'm your host, Jennifer Colamonico, and I'm thrilled to be your guide as we explore new ideas for solving challenges that confound our uniquely american systems. Charged with delivering health and health care in a world that has far too much information and far too little wisdom, we'll aim to keep it simple, frank conversations about what it really takes to reimagine these systems of health and health care. Our HMA experts know how things work and don't work, and they have viewpoints on both the problems and solutions that are born from that experience. Vital viewpoints on healthcare is not just another podcast, it's your window into the minds of those steering us toward a healthier future. Subscribe now and together we will explore the hard earned wisdom that could change the way you think about your professional challenges. Our guest today is Liz Wroe. Liz is a principal in the Leavitt Partners DC office. Leavitt Partners being an HMA company, Liz came to Leavitt partners after nearly 15 years in the US Senate as a health policy director, first on the Senate Budget Committee and later as chief counsel to the help committee, where, of course, there is significant health policy jurisdiction over there on the help committee. Liz has since then spent about ten years in the private sector, leading multisector legislative and policy strategies, working with a lot of stakeholders inside and outside government to bring forth policy solutions, many of which are involved in our conversation today. One of the many interesting parts of Liz's background is that she was the lead republican staffer on the budget committee during the passage of the Affordable Care act. She was also there later when there were subsequent efforts to repeal the Affordable Care act, and then again later when there were efforts to stabilize the individual market once the Affordable Care act sort of took off and was beginning to be implemented. So she's had really a firsthand, a front row, whatever metaphor you want to use, an in depth point of view to the evolution of the Affordable Care act. And it seems like a great place to start our conversation today. So, Liz, your experience here in the Senate, how does that experience affect the work you do today? How do you bring that to bear on your work with clients? And I guess what has surprised you the most about how the ACA has evolved that you may not have expected when all this.

Liz Wroe: Well, you know, I think the Affordable Care act, for a lot of Hill staff that were around when it was enacted, was really a unique piece of legislation. It was obviously a huge political priority of a new president, President Obama at that time, it was a relatively large piece of legislation, impacted a large number of Americans, was over a year or so in the making. So it really was. When I think back on all of the pieces of legislation I worked on, it really does hold a place as one of the most unique experiences just because of the importance of the policy, the political ramifications, the press coverage that was happening at the time. It was a very unique scenario to be in meetings with your boss and then walk outside the door and CNN was there asking for what you had talked about in your meeting on budget reconciliation. I mean, that was not a normal thing. So, first of all, I really reflect back know the experience of being part of such a big piece of legislation. And as folks remember, there were a lot of ups and downs in that process. The House passed a bill, the Senate passed multiple bills from different committees, had to put them together, passed them on Christmas Eve, morning of Christmas Eve in the Senate. And then lo and behold, about a month or so later, Scott Brown gets elected to fill Ted Kennedy's seat in Massachusetts. And all of a sudden, there are no longer 60 democratic votes in the Senate to pass the full bill. And you're now looking at this totally unique scenario of passing the bill in two stages as an underlying piece of legislation and then immediately amending it through the really complicated budget reconciliation process. So I often say that when it comes to policy or process, there's almost nothing that we didn't encounter when it comes to the Affordable Care act. So it's a really great background to have when speaking to clients just about process and how they have a particular healthcare policy that they want to see enacted. It really does give a lot of background into the process on the policy side of things. I think at the time when the conversation around the Affordable Care act started on the Hill, it seemed to be two primary issues that Congress wanted to address. One was coverage expansion and really focusing on coverage for the uninsured. And so this is people that didn't qualify for Medicaid or didn't have an affordable offer of employer sponsored coverage. Maybe they were unemployed. And at the time, the individual market was regulated by the states. You had smaller risk pools. So often it was an unaffordable product for a number of people. So that was really one pillar. The second pillar that Congress wanted to focus on was what we called bending the cost curve. And so essentially what that meant is when we looked at CBO scores of specific policies, we were looking beyond ten years, we were looking 20 and 30 years to see if overall health care spending was reducing. And so at the time, that was an equal goal of health care reform, as it was known, before they called it the Affordable Care act or before it was Obamacare. And so ten years out from when the major regulations under the Affordable Care act became law in 2014, I think the impact on coverage is clear. The individual market has been transformed. The subsidies have obviously helped millions of Americans. And then you have a number of states that have expanded Medicaid. So there's been a significant shift in coverage. But I still think we see this underlying issue of healthcare cost as an issue that Congress still really hasn't taken a substantive look at in a really structural way.

Jennifer Colamonico: So talk more. Know, when we think about bending the cost curve and those elements of the ACA, I think we know how it's shown up in Medicare. We see where it's shown up in models and how well it's worked, certainly is always the subject of research and debate. But what is it that Congress failed to do or could do if we're looking proactively to address this second pillar?

Liz Wroe: So at the time, Senate Budget Committee Chairman Kent Conrad, along with my boss, Senator Greg, who was the lead Republican at the number of budget committee hearings on health care spending and on the Affordable Care Act, Senator Conrad would talk about how, if enacted, the Affordable Care act would bend the cost curve. And Senator Greg would say, no, it doesn't. So one day they decided that they were going to let the referees decide. So they sent a letter to CBO, to the Congressional Budget Office, and basically know, what would it take to actually bend the cost curve in federal health spending? And I remember this very clearly, they got a letter back. And essentially what CBO said at the time, so, again, 2010 was that unless you touched two structural drivers, almost anything that you were doing was going to be a little bit window dressing. Like, you may reduce health care spending, you may make programmatic improvements, you could have delivery system reforms. But if you were really going to substantially change the directory, you had to touch two things. One was fee for service. We had to get away from fee for service and move towards a more value based system. Or paying for performance was kind of what it was known at the time. The other thing equally as controversial was to look at the treatment of employer sponsored coverage and the taxation on the tax treatment of employer sponsored coverage. Because if you look at those two drivers, one on the fee for service Medicare side, that's a really core driver of spending. When you look at the tax treatment of employer Spencer coverage, the revenue associated, that is significant. It's in the hundreds of billions of dollars. And so that was really CBO's view at the time was that unless you're really making structural changes to those, you're probably not going to see changes in behavior. So that did, to be fair, that led to some of the things like accountable care organizations or other delivery system reforms. There were a lot of pilot projects and pilot programs within the ACA and kind of the delivery system reform area, but none of them on their own was really a complete structural change. And then we had the Cadillac tax, which was an effort to change some of the incentives on the employer side. And how that was structured at the time is CBO said that would bring new revenue in, but it wasn't drafted in a way that actually would curb utilization. There are ways to do it where you actually could start to curb utilization and you start to see some utilization come down. So you would get the revenue benefit and you would also get the utilization change. So at the time, those were kind of the two pillars. And the reality though, is that to make changes in either of those spaces requires a significant amount of political will and a lot of stakeholder alignment because there are so many different stakeholders that benefit from the current system.

Jennifer Colamonico: Well, and as with any major know, passing, you pass it, you know, it's going to take a while to sort of get it right. And obviously we spent a lot of years trying to undo the ACA and now we're back to making it work. So I'll put that in air quotes. Right, making it work. But let's talk about incentives. We've created this system of incentives to make the Affordable Care act, which kind of have worked. They've worked in some ways, I think, to your point, on the access side, but they haven't really worked on the affordability part. So maybe talk a little more about those subsidies and silver loading. Obviously that's part of that. It's always one of those things. You think people know what it means, but you don't always know what it means.

Liz Wroe: I was going to say I'm happy for the people that are living their lives not having to know what silver loading means in the ACA marketplaces. One of the major policies to expand coverage was the creation of the ACA tax credits. So those are premium tax credits that are given to individuals who are eligible for subsidies. The interesting thing about the subsidy amount, though, is that it is really calculated based on the second lowest cost premium in a certain area. So what that means is that as premiums raise in the market, the tax credit or subsidy raises to meet that. So there's really no downward pressure on premiums. So underlying premiums can continue to increase. However, the consumer who's eligible for subsidies is kind of insulated from that because the premium credit or subsidy is going to increase to cover that. So we are protecting the individual for sure, because if they are eligible for a tax credit, but in the underlying market, we're not really doing a lot to change utilization focused on value or again, really bend the cost curve. And so there's no limit on the subsidy in general, like within the statute. The way it's drafted is it's an entitlement. So however many people are eligible, that's what the government's going to spend. And when you talked about silver loading, that construct is built on this idea that as premiums go up, that subsidy goes up. And so what happened in that case was, and that was when I was my second time on the Hill, when I was the Senate help committee at the time, I think it was President Trump decided not to pay the cost sharing reduction subsidies that were in the Affordable Care act law. And so there was this bipartisan effort that my boss at the time, Lamar Alexander, was in charge of was to try to figure out a way to pay for the cost sharing reduction subsidies, get republican congressional support for that, and maybe tie that with some things that Republicans might like, like some additional state flexibility through 1332 waivers. And we ended up not being able to enact that. We got very close. But one of the things that happened was the states came up with this contract of silver loading. Which was essentially saying to the government, don't worry so much about the cost sharing subsidies. We're going to inflate the price of your second lowest silver plan. So your subsidies on the premium side are going to be so significant that it's actually going to be a zero dollar plan, and you may actually be able to afford a plan that has no cost sharing in it at all. And so essentially, that's kind of what changed the market initially was this concept of silver loading. So it's an interesting thing where the government's changing to meet the affordability needs, but it's really moving costs from health plans to consumers to the federal government, rather than really looking at what's driving these underlying costs to begin with. And things like, why do we have risk pools where the populations are so much unhealthier than originally? The ACA construct was that if you had an individual mandate, there'd be enough young and healthy individuals to pay for the coverage of folks that had higher health care costs. In reality, I think the risk pools were a lot more challenging than folks realized. And even the individual market, in many states having an individual mandate, there were not enough young and healthy individuals to balance out that cost. So that's where the federal government kind of had to keep coming in. So certainly an interesting construct that we're still dealing with now in 2025, there's expanded ACA subsidies that are going to be up for reauthorization. So I expect that Congress will take a look at these issues again. And I guess depending on who's in power, we may see some additional changes to the tax credits.

Jennifer Colamonico: So do you still think that the CBO analysis is correct, that those were the two kind of levers to bend the cost curve and that what was the change in the tax, how we treat employer tax credits for coverage being one and fee for service and Medicare being the other? Do you think those are still the two big levers?

Liz Wroe: I think they're two of the biggest for sure. I think the challenge is what do you do with those levers? And so I think what we learned is there's things you can do that will just give you savings and a piece of legislation, but the really hard choices are the ones you have to make in order to see a change in the long term. And so one of the things that I think about more so is this concept of sustainability. I think that's kind of what CBO was talking about, is if you look at your certain programs, are they sustainable in the sense that you either have enough revenue or money coming in the door to pay out benefits that are needed. And what does that balance look like? And so certainly those are two of the major levers. I think there's other key elements to healthcare costs that things like changing demographics. I don't think you can have a conversation about health care costs unless you're also having a conversation about changing demographics. Also, the impact of innovation, all of the medical advances that luckily are making people be able to survive cancers for ten and 20 years when ten or 20 years ago they were death sentences. So there's a number of different things that I think are part of that conversation. But from a government perspective, if you're just looking at the budget, those are the two key budget levers for sure.

Jennifer Colamonico: So you talked about kind of insulating people from premium increases here in particular with the marketplaces. But is there a better way that you could spend those tax dollars where you would not reduce coverage, obviously, coverage being the first pillar and an important part of this, but that you would be able to apply pressure, I guess, from that shopping mechanism to be able to reduce costs. So you talked about kind of insulating people from premium increases here in particular with the marketplaces. Is there a better way that you could spend those tax dollars where you would not?

Liz Wroe: There's a number of ideas out there. My boss at the time, Senator Greg, during the Affordable Care act, he had a proposal that, again, it's ten plus years later and I still think is interesting, which would just to be to subsidize either a catastrophic plan or a base level healthcare package kind of for everybody, so that you would have the ability to really try to make sure that everyone has some form of insurance, and then on top of it, you'd have some flexibility to decide kind of what level of benefits that you would want. But for the federal government, we would kind of subsidize up to a certain amount. And I think there's some studies that show that that type of approach could also help with utilization or really making sure that people are getting, like, how do you make sure that people get the care that they need without necessarily getting a lot of unnecessary care? So that's one idea as a way to kind of create benefits that are a little bit more easily tailored. Other ideas on the portability side certainly is do people do better if they can keep their same healthcare plan and their same doctors, depending on what their job is? Could you actually look at portability? There's been ideas out there which I think are kind of interesting around. Do you set people up with individual accounts like an HSA like model, where maybe the federal government subsidizes into that account? So if you're flowing through life, whether you're employer sponsored coverage or you're going into the individual market, or then you're on Medicaid, or then you're in Medicare, that account kind of stays with you and you have the ability to use it to save money for care you might need later in life or emergency care. So I think there's a number of different structures out there. I think at the end of the day, one reality, I think, is that every state is a little bit different. I think we saw that with the Affordable Care act, where you can look at some of the different regions and say, okay, there are some risk pools. There's a number, for example, within the south, that some of the states are similar, and they had a hard time because they just did not have a lot of young and healthy individuals, so they had potentially older and sicker communities. So you would need to have some real strategies to help people that need extra care. I think the reality, though, is that at this point, it's hard for me to imagine any scenario where the Affordable Care act marketplaces are repealed. So really to me it becomes a question of how do you look at them in light of a current market, and is there additional flexibility that's needed around benefit design? Would states like additional flexibility on the types of benefits they would like to offer? One thing I worked on quite a bit was the idea that you really should have a lot of flexibility in the type of plan you purchase. So under current law, you have to be under 30 to purchase a catastrophic plan. I think that could be a good opportunity or option for some people above 30 to get healthcare coverage if they're not able to get another plan. So I think there's ideas out there. But again, I think it's hard to imagine a completely alternative structure at this point in time.

Jennifer Colamonico: Going back to the point that the CBO made about employers, I know you do a lot of work with employers these days, and a lot has changed. I mean, maybe I should start there, right? A lot has changed. We've learned a lot. We've tried a lot of things over the past ten years. But maybe talk a little bit about, from your point of view with employers, the extent to which they may be not eliminating their tax benefit or providing coverage. But is there maybe more openness on the part of employers in your experience, to being part of the solution in a different way here?

Liz Wroe: Well, I think it's important to remember that over 50% of all Americans that have health care coverage get it through their employer. And in many instances, those are relatively robust plans. And while a number of studies still cite affordability as a concern, there's actually a relative high degree of happiness with folks employer plans. And so one of the things that happened as part of the Affordable Care act debate was how do you get new coverage options for people that want it without disrupting the existing coverage options that people like? That's where the like, if you like your plan, you can keep it came from, because originally it actually wasn't going to be the way the original proposals were going to get rid of the employer market, and it was going to be one big, large marketplace, and if you liked the plan you had, you could not keep it. So eventually the policy changed to meet the talking point. Also, there was just significant pushback from the business community because the business community at the time felt that providing employer sponsored coverage was a significant benefit to their employees, that their employees really relied on and helped make them competitive in the job market. I think when we talk to employers today, they're certainly strained by rising healthcare costs and particularly very large employers that are self insured, which means they're paying for the claims of their employees. They're looking at strategies to help improve access, reduce costs, improve quality. So I think, I would say there still seems to be a strong commitment from the employer community on the importance of providing health coverage to their employees. I think there might be more openness to how that's done. So in some instances, there might be some employees that would be comfortable giving a subsidy or some type of credit to employees that they could then use to purchase insurance in a marketplace in the state, if that was allowed. I think there might be some that are interested in that, but I think there's others that still very much see the provision of health insurance as a pretty significant benefit to their employees. So it's interesting to see where the market has gone. I think we're seeing employers really leaning in in a number of areas that are really important, like mental and behavioral health, racial equity, and justice. I think trying to see how they can utilize and structure their health benefits so that they actually are addressing some health disparities. We've seen a lot of push around telehealth, also things like value based payment arrangements. I mean, I think one of the things that's really interesting about the employer market is that there is a lot of flexibility by design. And so they really can be, particularly a very large employer that is self insured, it can be a really interesting proving ground for different value based strategies. So my personal view, and from, with the clients we work on, is that it's pretty hard to imagine a coverage strategy in this country that doesn't really leverage the employer market.

Jennifer Colamonico: So if you had a magic wand and you could wield it to make one change in the system, that would have the ripple effect of improving this particular policy area, this particular kind of conundrum, what would that be?

Liz Wroe: So I think I would have a political magic wand and then maybe a policy one on a political level. I think we're still challenged by members of Congress that want to relitigate the enactment of the Affordable Care act. And I think as somebody who was there and who worked with Senate Republicans who did not vote in favor of it, I certainly understand some of the policy concerns with the affordable care act of those that voted against it. But what happens is, over time, the world changes and policies are enacted and markets change, and from those changes, people's lives change. And so I think it's an absolutely valid conversation to focus on what does the market look like today and what's good about it and what's bad about it. But the reality is, you can't undo a vote that happened 14 years ago. And so I think that would be the one thing I really wish, from a political sense, the same thing would be true on the democratic side. I can't think of any other piece of legislation that I was involved in that it's enacted and then you're never allowed to touch it. And so I spoke about how political that piece of legislation was, how political that process was. There was no other time in my life that I got elbowed by reporters in the know trying to do my job other than the ACA enactment and then the ACA repeal and replace. They were unlike anything else I've ever seen in my life. And so that level of political involvement has kept members kind of on one side or the other. And it's been pretty challenging to get people to just look at the market as it is, look at the program as it is, and have a really frank conversation about potential things that could be changed. And so I keep wondering when that's going to happen. I think we thought there was an opportunity in 2017 when the CSRs kind of had to be paid. Repeal and replace had literally just failed. And when I say just failed, I mean three minutes before had just failed. And so as soon as the vote on the Senate floor failed, Senator Alexander, who I worked for, walked across the Senate floor at 02:00 in the morning and started talking to then Senator parody Murray, who is at the time the ranking member of the health committee. And we went back up to Senator Alexander's hideaway, and we planned a month's worth of hearings on bipartisan stabilization efforts. So at that time, we thought maybe because we had tried to repeal and replace, and that proved to be unsuccessful, the thought process know there's a crisis in the market. And so maybe now, once we've gotten it out of our systems, we can kind of do something in the middle, and we just weren't able to get there. And I would say the kind of ACA politics on both sides of the aisle was the primary reason we did not get there. And so we could actually get there on substance, behind closed doors. It was the politics that stopped it from happening. And the only reason we didn't have significant market disruption is because some of the states figured out silver loading went to the administration and at the time the Trump administration socio kind of blessed silver loading. Which is comical in so many ways when you think about they wouldn't pay CSRs, but they allowed silver loading. Which actually was a significant more of an increase in federal spending to the ACA than CSRs ever would have been. So they backhandedly stabilized the ACA for a decade by not paying CSRs. So anyway, I think that's the thing that I would want most, is to be able to start having just honest conversations about flexibility. States might need subsidies that might be appropriate, what should continue, what not to continue. And you can still have politics can still be involved. It's still okay for people to have different ideas. But I think it's hard sometime to see members of Congress who were not there in 20 08 20 09 20 10 still having that same fight and you just kind of wish maybe we could move on a little bit. So I would say politically, that's probably the one thing I really wish would change within healthcare.

Jennifer Colamonico: Well, I know we could talk for a long time about these issues and we always appreciate the opportunity to check in with you. Thank you so much for your time today, Liz, and we just really appreciate all you're doing on this issue.

Liz Wroe: Thanks so much.

Jennifer Colamonico: This episode of Vital Viewpoints on Healthcare is sponsored by Leavitt Partners DC Direct. Are you looking for weekly insights on health policy developments in Congress and in the administration? DC Direct federal policy intelligence services help clients understand not only what key developments occur each week, but also explain why they matter. Visit LeavittPartners.com forward Slash DCDirect for more information. Thank you for tuning in to another enlightening episode of HMA's vital viewpoints on healthcare. We hope today's discussion has sparked new insights and perspectives. To learn more about our esteemed guests, please be sure to visit healthmanagement.com Forward Slash podcast. Until next time, stay informed, stay curious, and keep searching for the wisdom that will help to transform our healthcare landscape. This podcast was produced by myself, Jennifer Colamonico, along with Tiffany Mckenzie, in collaboration with our guests. The content is the property of Health Management Associates.

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