What Changes Are Ahead for the Affordable Care Act?

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Wharton's Mark Pauly and Robert Field discuss what's ahead for the Affordable Care Act.

Within hours of being sworn in as the 45th president of the United States, Donald Trump signed an executive order to begin dismantling parts of the Affordable Care Act (ACA). Considered President Barack Obama’s signature legislation, the act has allowed more than 20 million previously uninsured citizens to acquire health care. Yet it has remained controversial since it was passed by Congress in 2010.

With unpopular mandates, penalties for those who do not purchase coverage and higher premiums caused by insurers pulling out of certain markets, the policy — known as Obamacare — is in peril. Trump and Republican leaders in Congress have vowed to “repeal and replace” the law, but nobody knows exactly what a new version will look like.

Mark Pauly, Wharton professor of health care management, joined Robert Field, Wharton lecturer and professor of law and health management at Drexel University, to talk about what happens next for the ACA on the Knowledge@Wharton show, part of Wharton Business Radio on SiriusXM channel 111.

Significant Changes?

Until lawmakers can establish a clear path forward with the Affordable Care Act, there is much the President can do with his power of executive order. The hastily drawn order that Trump signed on January 20 doesn’t give specifics, but it does allow federal agencies to “change, delay or waive provisions of the law that they deemed overly costly for insurers, drug makers, doctors, patients or states,” according to an article in The New York Times. Given such broad authority, Pauly said, leaders could easily jettison such items as the employer mandate, which requires business owners with more than 50 employees to offer health insurance coverage, or some of the nuisance taxes charged to insurers or drug companies to help finance some of the coverage.

“The new administration may be able to say, ‘Yes, we did something right away,’ and it would be somewhat substantial. But there’s still a lot to work on,” Pauly noted.

Field agreed that the use of executive order could dramatically reshape the policy before a bill can wind its way through Congress. “He could make a lot of changes behind the scenes that start to whittle away at the law, and he can do that on Day one.”

“I think the question is how much he’s playing to the public and how much he’s playing to Congress.” –Robert Field

The use of executive order can go far toward appeasing supporters who are demanding changes to the law, Field said. But just how much will be undone under executive power remains to be seen.

“I think the question is how much he’s playing to the public and how much he’s playing to Congress,” Field noted. “There are a lot of executive orders that can throw monkey wrenches into the works of Obamacare, but it’s not going to make a big public splash that an actual repeal bill will or a replacement bill. So, he may start to unwind the law, or he may wait until he can do something more dramatic.”

Cost Will Remain a Key Issue

Touting his background as a businessman with global experience in negotiating a better deal, Trump has vowed to devise a health plan that will cost less. Both Pauly and Field questioned whether that’s possible given the enormous expenses involved in medical care. 

“He’s promised to deliver a replacement program that costs less. Based on what I know as a researcher, that’s impossible,” Pauly said. “The kind of cost reduction that would be needed to fund the goals that he’s outlined just doesn’t add up.”

At the heart of the insurance issue is the cost associated with risk pools. Insurance companies manage profit by covering a mix of people who are high risk, meaning they require significant payouts for coverage, with people who are low risk, meaning they are relatively healthy and do not have a lot of medical expenses. The Affordable Care Act subsidizes some of the high-risk cases and enforces a penalty for citizens who go without purchasing health care. However, many healthy Americans have chosen to pay the penalty instead of the premiums, which skews the average in the risk pool.

As coverage becomes less profitable, many insurers stop offering their products in certain areas. That reduction in competition translates into higher premiums.

“I think the Republicans have put themselves in an impossible situation if they are really going to come through on their promises,” Field said. “They have sworn they are going to get rid of the individual mandate, which is what they disliked the most about Obamacare, but there’s really no viable alternative to making the insurance market work and getting healthy people into the risk pool. How do you make it accessible at an affordable price to somebody who’s already sick or older?”

Pauly disagreed, saying he believes there is a way to deal with the individual mandate and still create high-risk pools that are properly funded. “Somebody’s going to lose no matter what,” he said. “I’m not necessarily endorsing all of the Trump proposals, but this is a strategy that seems to make some sense to me.”

Sweating the Small Stuff

The professors point to the complexity of the Affordable Care Act as a reminder that dismantling a piece of legislation isn’t as simple as it sounds. Aside from the big-ticket items — individual mandates, subsidies, etc. — there are myriad smaller items wrapped up in the policy that are still quite significant.

Improvements to Medicaid, the establishment of safety net hospitals, the administration of medical records, even the requirement that restaurants post nutritional information are all contained within the hefty document that is the ACA.

“He’s promised to deliver a replacement program that costs less. Based on what I know as a researcher, that’s impossible.” –Mark Pauly

“We should also not lose sight of all the other provisions below the ocean’s surface in this iceberg that are crucial to the overall workings of it,” Field said. “Even if the exchanges went away, there’s a tremendous amount in the law that’s been having a huge effect for the last five or six years on the way our system focuses, and moving [those elements] could disrupt a lot.”

Start pulling out single straws, he said, “and the whole edifice could collapse.”

Keep Calm and Carry On

Given the difficulties and divisiveness that come with crafting a comprehensive health care policy, it’s likely that the new and improved version of Obamacare won’t be that much different than the current one. Even so, American society will carry on.

“I don’t think it’s going to be the end of the republic, no matter what happens,” Pauly said, adding that the worries over the policy are somewhat exaggerated. “There’s a way to think of a streamlined version of Obamacare without a lot of the unnecessary bells and whistles that were put in for various political reasons or various political constituencies but that would perform the function of getting at least some reasonably decent health insurance to every American.”

Field noted that in some ways, Trump seems to favor a more universal coverage plan than a lot of his Republican colleagues. “I suspect there’s a lot of discord beneath the surface within the Republican Party that hasn’t bubbled up yet that’s going to play itself out as they try to figure out a replacement plan.”

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