The Unhealthy Return to Individual Responsibility in Health Policy

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The Republicans’ ACA replacement plan espouses individual responsibility—a naïve and ill-advised approach to healthcare reform.

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It is still an open question—at least for a little while longer—what exactly the Republicans’ Affordable Care Act “repeal and replace” promise will entail.  However, the broad contours of the Republican strategy, which both Congress and President Trump have made clear they will pursue at all deliberate speed, are already visible.

Speaker of the House Paul Ryan (R-Wis.) foreshadowed the Republicans’ central approach in his Patient’s Choice Act, a health care plan he put forward in 2009. That plan emphasized a desire to empower individuals to make healthy decisions, asserting that a “large percentage of heart disease, stroke, and type 2 diabetes, as well as many cancers, could be prevented if Americans would stop smoking, start eating better, and start exercising.” According to Ryan, the aim of health reform should be to encourage “individuals to adopt healthy lifestyles and behaviors.”

Ryan’s assumption—a theme also echoed in the other major Republican proposals on the table—is that personal responsibility will serve as a salve to the wounds of the American healthcare system. Impliedly, if Americans would only jog more and eat more vegetables, then we could dramatically reduce cancer and strokes and save a fortune on medical care.

Republicans like Ryan will advocate for individual responsibility for healthcare through policy tools that reduce insurance coverage and, in turn, lower federal and state spending on medical care. With less insurance as the keystone to reforms, individuals and families will pay an increasing share of their medical care costs.  Put simply, Republicans are relying on the belief that people with more “skin in the game” will make more responsible decisions about their health and less wasteful choices about their healthcare consumption.

These ideas are naïve.

It is unsurprising that when people have to pay for a greater portion of their healthcare bill, they use less care, but we know people generally do a poor job of differentiating between effective and ineffective medical care. These rationing decisions harm poor and sick people, who fare better when they have access to free or low-cost care. Although it is too early to know what impact the Affordable Care Act reforms would have had on health outcomes over time, early studies already show that people have been using increased levels of preventive care and are complying more with drugs and treatment recommended by their doctors.

Even acknowledging Ryan’s point that genetics do not determine health fate, his assertion that incentives for healthier choices will reduce preventable illnesses is shortsighted. Many diseases are caused in part by environmental and social factors over which individuals lack control. Furthermore, we have long understood that individuals’ lifestyle “choices” are strongly shaped by their environments.

Now, it would be one thing if Republicans proposed a preventive strategy that shifted spending from individual health insurance to public health interventions, but such a strategy seems unlikely.  In 2012, the Republican Congress chose instead to cut the ACA Prevention and Public Health Fund by $6.25 billion dollars, over one-third of its total.

Another weakness in the Republican approach to healthcare policy is that a healthier population does not translate to lower spending on medical care. Throughout history, whenever society has succeeded in eliminating or drastically reducing a major cause of disease and death, another has inevitably taken its place. And the new killer has not necessarily proved to be kinder or cheaper.

In fact, when people live longer, they consume medical care over a longer period of time. Plus, everyone still dies, and old age and death are expensive. For example, studies have shown that reductions in smoking in a population actually lead to increases in lifetime healthcare spending because people live considerably longer and consume healthcare for a greater number of years.

To see how misguided it is to believe that society could become healthier and simultaneously spend less on medical care by increasing individual responsibility, consider just a few examples of policies that Republican leaders have included in their recent proposals.

Health Savings Accounts (HSAs). HSAs are a perennial Republican favorite and fit perfectly into the individual responsibility mantra. HSAs are tax-advantaged savings accounts for medical care spending; individuals can invest money tax-free and their savings can accumulate interest tax free. The IRS stipulates that these accounts must be paired with a high deductible plan—at least a $2,600 deductible—and have a maximum annual contribution of $6,750 for family coverage in 2017. Republicans are likely to loosen such restrictions, suggesting that HSAs create incentives for “responsible” people to save money and spend smartly on medical care. However, these incentives disproportionately benefit people in upper-income tax brackets and those with surplus income who can save. The poor and sick will be harmed when these policies replace the ACA’s more equitable forms of tax support for healthcare spending and they can no longer afford medical care.

Continuous Coverage Requirements. Republicans have promised to preserve the ACA’s preexisting condition protections, but this promise will prove hollow for millions of Americans who will struggle to pay monthly premiums. This is because Republicans have proposed repealing the ACA’s requirement that insurers accept all applicants and cover their existing medical conditions—a demand that is hard to get insurers to swallow without an individual mandate—and replacing it with an extension of continuous coverage guarantees already in place for group coverage to the individual market. The guarantee will be that to an individual who never experiences a break in coverage cannot be denied insurance. But for even the most responsible individual, a period of unemployment or serious illness could make it impossible to maintain coverage, especially without the help of the ACA subsidies and Medicaid expansion.

Wellness Programs. Republicans have also encouraged the use of wellness programs to contain healthcare spending, typically citing a Safeway case study as the “golden child” of workplace wellness. These programs reward employees for engaging in health-promoting behaviors or for showing improvements on certain health outcome measures, such as blood pressure. Unbiased evaluations of these programs, however, show little evidence of overall cost reduction and suggest, instead, that these plans appear to save money by shifting costs to unhealthy enrollees, many of whom face structural impediments to successful participation in these programs. Republicans want to increase the regulatory limit on premium discounts that an individual can receive for wellness program participation, which would magnify the potential for cost-shifting.

Tax Credits, Tax Deductions, or Other Premium Support. A number of Republicans, including Speaker Ryan and Representative Tom Price (R-Ga.), President-elect Trump’s nominee for Secretary of Health and Human Services, have proposed tax credits or tax deductions to subsidize the purchase of health insurance.

These proposals differ from the ACA’s subsidies in two key ways: sufficiency and shortfall. For many Americans, the basic support provided under Republican proposals would be considerably less than the ACA’s premium and cost-sharing subsidies. For example, in his Empowering Patients First Act, Representative Price proposes a $2,100 tax credit for anyone between ages of 35 and 50. In 2017, the national monthly average premium cost for a 40-year-old individual in a bronze plan was $350, or $4,200 per year. Under Price’s plan, after the credit, this individual would still spend nearly $200 per month on premiums and likely be left with a deductible as high as $5,000 or more to pay before insurance would kick in. Healthcare spending per capita in the United States was $10,000 in 2015—five times the amount of this tax credit that Price has proposed. In contrast, in 2016, seven out of ten exchange enrollees could get a plan for a monthly premium of $75 per month, and nearly 60 percent of exchange enrollees also received help with cost-sharing.

The second major difference between the Republican strategy and the ACA centers on what will happen once healthcare costs increase over time, as they inevitably will. Under Republican proposals, the value of the relevant voucher, credit, or deduction will grow only at a predetermined rate, at or below inflation. This means that as healthcare costs grow over time—historically faster on average than the overall rate of inflation—the individual’s share of her medical costs will increase. The ACA is designed to prevent this increasing burden on individuals. In contrast, the Republican proposals are banking on it. By shifting costs onto individuals, they ensure control over federal healthcare spending. Republicans justify placing these burdens on individuals and families as a means to encourage them to spend more carefully, despite the fact that, as noted above, people fail to differentiate between effective and ineffective care and despite the reality that poor and sick people are harmed by such reductions in coverage for medical care.

Looming Trump-era health policies will amount to nothing more than a privatization of health spending risk. This strategy is not new. Anyone who wants to preview what is coming can simply look back to the economic insecurity created by medical care spending in the 1990s and the first part of the 2000s—precisely what motivated the establishment of the ACA in the first place. This history, which the United States now seems condemned to repeat, is captured vividly in books like Jacob Hacker’s The Great Risk Shift, where he documents how Republicans’ “personal responsibility crusade” catapulted working families into deep economic and health insecurity. Unfortunately, after a short period of reprieve following passage of the ACA, American families will once again face great insecurity if “repeal and replace” proceeds as planned.

Allison K. Hoffman

Allison K. Hoffman was a Visiting Professor at University of Pennsylvania School of Law in Fall 2015 and is a Professor of Law at UCLA School of Law. An expert in health care law and policy, Professor Hoffman’s work focuses on critical health care issues, including the ACA, Medicare and retiree health care expenses, and long-term care. Her research also addresses the role of regulation in supporting health and well being.