Question: What has been your personal experience with the healthcare system?
Jacob Hacker: Well, I think my experiences with the healthcare system have been pretty similar to most Americans. I was born into American healthcare and have grown up not aware that there was anything different. When I was in college, I went and worked on Capital Hill for then-Representative Ron Wyden—he has since gone over to the Senate side—for his chief health assistant. While I was there I came to discover not only what I had already known, which is that there are a lot of problems in American healthcare, but that our system was very different from those systems in other countries.
So one of the things I did when I went back to college after that summer is started studying why the United States had ended up with such a distinctive system, and ended up writing my senior thesis on the rise and eventual fall of the Clinton health plan, and wrote my dissertation while I was at Yale on the development of America’s distinctive system of workplace social benefits, including healthcare but also retirement pensions.
So I've been studying this now for most of my adult life, and at the same time I've gotten more and more involved in it as a participant in the debate rather than just a student of it. The story there, which is worth telling, is that as I was studying the development of our distinctive system, I was always wondering why is it that it's so hard to reform American healthcare. After all, we've had efforts from the early 20th century to try to do this, to really address the problems in American healthcare, and they've only grown worse. My answer was that it's hard in part because we failed in the past and we've come to rely so heavily on the sort of jerry-rigged system of private employment-based benefits. And that Americans, while they're worried about the cost of those benefits and worried about their security, and millions of Americans don't have coverage at all or who are unprotected against medical costs, that at the same time people are fearful of changing the arrangements they've come to rely on.
That's why it's so hard. And I think that's the central reason why this debate is so bitter and fierce. There is really a lot of fear that can be provoked by opponents of reform, and it's amazing we've come as far as we have in the debate, given the history of past defeats.
Question: How did the ideas in “Healthcare for America” go from theory to policy?
Jacob Hacker: Well, it's been a bracing experience in some ways, because every academic dreams in their spare time, or at least a lot of academics dream in their spare time, that they're going to have a big influence on national policy debates. But I think our vision of what that would be like is sort of similar to our own experiences in the academic world, that somehow going into a Washington policy debate is like having a seminar where you're talking about your ideas and other people are respectively disagreeing or agreeing. It's been really exciting to be involved in the debate, but it's very tough. There is a lot of criticism of some of the ideas that I put out, and I feel enormously gratified that I've had influence. At the same time, I've definitely learned that being involved in big policy debates is not for the faint of heart. I think the main thing is that I got involved in this debate because I feel as if the system we have today is failing too many Americans and that we have to act to reform American healthcare. It was clear that we weren't going to be doing something on either of the ideological poles.
We weren't going to move toward some radical free-market solution that had everyone getting tax breaks—tax credits to buy healthcare insurance outside of employment. And on the other hand, we weren't going to move towards a universal single payer system where the government was insuring everyone. We really had to work within the confines of the system we have, but building on the existing system is not easy and in particular there is a really big problem at the heart of our existing system that most of the reform ideas that were on the table when I started getting involved in this debate weren't addressing.
That is, private insurance companies simply do not have an interest in containing cost and providing health security. They are in the business of making money and paying for healthcare. Many insurance companies are also in this business because they want to keep shareholder values up and earn profits. To me, it was the need to have some kind of counterweight to the private insurance companies even as we built on the present system that led me to argue for having a competing government public insurance plan that would be offering some discipline in the market, so that the private companies would feel the heat of having a strong competitor and would be pressed to improve their performance. Even though I understood that this public insurance plan would be just one part of the market, that private insurance plans would still have primary role. But the idea would be that they wouldn't have this kind of exclusive lock on the health security of Americans.
Question: Have your ideas about healthcare changed since “Healthcare for America”?
Jacob Hacker: So when I wrote Healthcare for America in 2007, I was building on a proposal I developed back in 2001 called Medicare Plus, and in that transformation from Medicare Plus to Healthcare for America was one of the journeys I took as I developed the idea. It became clear to me that although I wanted to make sure that people understood that we were building on the Medicare program and offering an alternative to private insurance plans, one of the reasons I emphasize in Healthcare for America that this was a separate program for Medicare—and I have in my work since then—was that I really wanted to argue, and I still argue, that this is just one component of a crucial set of reforms that needs to happen.
Those reforms have three basic elements. First, that you have shared risk. That people are in a common insurance pool, or they're in insurance plans that are regulated to make sure that they have protection against having unexpected medical costs and the insurance that's there when you actually need it most. That, unfortunately, is not always the case today. So the idea is that if you don't have coverage through your employer, you should be able to get coverage through some kind of new system—a “national insurance exchange,” it's sometimes called. And one of the choices you should have within that exchange, and I've always argued, is a public health insurance plan modeled after Medicare.
The other two elements are really important too, and we tend to lose sight of them in the debate because we've been talking so much about the public health insurance plan. As crucial as it is, there are also two other elements that we need to pay attention to. First, is we need to have shared responsibility. We have to have employers contributing to the system. That means that if they're not providing health insurance directly to their employees, they need to help pay for the cost of that coverage. I'm afraid that there is movement away from that in some of the existing bills on Capitol Hill. The House legislation that was just passed has a strong element of shared responsibility, but the Senate Finance Committee bill that was considered and passed through the committee earlier this year doesn't and needs to have that change made before Senate passes a bill.
The third element is individual responsibility. I always have argued that there should be a requirement on individuals to have coverage if, and this is a really crucial if, if there are affordable insurance options available. And one of the most interesting things, and I don't think I recognized this before, is the degree to which that individual requirement and the public health insurance option go hand-and-hand politically. When you ask people would you agree to be required to have health insurance. Americans are pretty weary about only about 40 percent of Americans are supportive of an individual mandate in surveys. But then if you say, "Look, people who are required to have health insurance will have the choice of a new public health insurance plan that will make sure they have affordable options." Then people are much more supportive of that individual requirement.
So to me that's an element that I just didn't recognize when I was developing this proposal, is how interwoven those three big aspects of my reform proposal are: shared risk, shared responsibility, and individual responsibility.
Question: What is your opinion of the House healthcare bill?
Jacob Hacker: Well, I think the major strengths of the healthcare bill passed by the House of Representatives is it makes a very strong commitment to affordable coverage. It does two things that are going to essential if we're going to have affordable coverage. It regulates the insurance companies quite significantly to make sure that they're providing coverage to everyone who needs it and not just cherry-picking the healthy.
The other thing it does, which I think is equally crucial, is it puts in place measures to make sure that that coverage would be affordable. There are two that I think need to be emphasized above all else. One is it has real money for subsidies to provide health insurance, to make it more affordable for people to buy health insurance. The bottom line is no matter what the government does to try to bring down premiums, you're going to have to pay a pretty substantial amount of the premium for middle-class and less affluent Americans if they're going to be able to afford our super-expensive coverage.
Then the second thing that it does is it creates a competitor to the private insurance plans in the form of a public health insurance option. There has been some concern that this public health insurance option isn't as strong as it should be. It's certainly not as strong as I originally had advocated or had wanted, but it's still a pretty good plan. It's going to be created by the federal government, it's going to be run by the Secretary of Health and Human Services in the same way that the Medicare program is. It will be available to Americans in every exchange, so if they're not getting coverage through their employer or if they work for a small employer that can't afford to get coverage on its own, they're going to have access to this public health insurance plan. And the public health insurance plan has a lot of tools available to innovate in the payment for and delivery of care to help bring down costs.
So I think it's a really strong element of the bill. If you take those two things together, the commitment to regulating the insurance industry and the emphasis on affordability, you have a very secure foundation for building in the coming years. I mean, we certainly are going to have to address much more forcefully than even the House bill does to long-term cost containment problem. The only way I think we're going to bring down costs over the long-term is to create real countervailing power in the market. That means countervailing power to the insurance companies from a strong public health insurance plan and countervailing power on the part of insurance companies in this public insurance plan. These are the providers of care. This doesn't mean just ratcheting down rates, it means changing the way in which care is paid for and, thereby, the way in which care is delivered. That's going to take time, but I think that that's—that you need to have that secure foundation such as the House bill has to be able to move in that direction.
If people aren't guaranteed affordable care and affordable coverage, then it's very hard to address the underlying drivers of care. So much of the cost gets shifted from people who aren't insured to people who are insured. Providers figure out ways to move the payments from one insurer to another. The insurance companies complain that they can't bring down care costs systematically because they're having this turning of people in and out of coverage, so you need to have a secure foundation in the form of broad commitment to affordable coverage if you're going to really address the big drivers of cost.
Question: What do you expect to happen to the bill in the Senate?
Jacob Hacker: Well I think there's no question that the pressure in the Senate to pull back from where the House is is going to be very strong. But I actually am optimistic and think there is a real possibility that the Senate bill will be pretty good too and they'll go to the conference committee with two strong bills able to bring together those bills for a very good final product. The problem in the Senate side is pretty clear. It is that you don't just need a majority. If you're going to go through the normal Senate process, you need to 60 votes. You have to overcome a filibuster and that means that the center of political gravity isn't a Democrat in the sort of roughly the middle of the party. It's a very conservative Democrat or a moderate Republican from Maine, like Olympia Snow or Susan Collins.
So that's the reality that's faced and that's why everyone's recognized from the beginning that the Senate is going to be the tougher nut to crack; however, Harry Reid basically has said, "Look, we want to have a good bill. If that requires that we really build on our on own majority, the partisan Democratic majority, so be it. He's trying to put together a strong bill and get a favorable read on that bill from the Congressional Budget Office and move forward to try to bring in wavering Senate Democrats and the two independents that caucus with the Democrats. We hear lots of speculation about whether he can do it, but I think that if he moves forward, as he moves forward, the pressure on those wavering Democrats is going to be very strong to at least support a debate on this issue. I mean, after all, this is something the House has moved ahead, Americans want healthcare reform, President Obama was elected on this issue and it really would be amazing to me, but perhaps it's not inconceivable, if Senate Democrats or those who caucus with them actually stood in the way of their being a debate.
All they have to do is say, "Okay. We'll let debate go forward. We will support a motion to end a filibuster but we won't necessarily vote for the final bill." So this is, to me, the right and honorable path for those Democrats who have concerns about the bill, it's to say, "I may not want to vote for it in the end, but I support the idea that we should have a democratic process where the votes of the majority are allowed to be heard."
Question: Have Obama and the Democrats delivered on their healthcare promises?
Jacob Hacker: They have delivered. President Obama, during the campaign, had a broad outline of reform. One that was relatively close to my 2007 Healthcare for America Plan, and by and large the elements that President Obama embraced during the campaign have been incorporated into the House legislation and, in a weaker form, into the Senate bills that have come forth. After all, there are two Senate bills. The Senate Finance Committee bill, and then the Senate Health, Education, Labor and Pension, or Health Committee bill. And those bills are different on some specifics. Notably, the Senate Finance Committee bill didn't contain a public health insurance option, whereas the Senate Health Bill did.
But if you take the amalgam of those two bills as sort of representative more or less of the sort of direction that Senator Reid wants to go, he too is proposing something that's very close to what Senator Obama embraced during the campaign.
President Obama has been very, I think, shrewd in letting Congress take the lead on this issue. I wrote early in the year that President Obama really had to follow three cardinal rules. He had to let Congress own this bill, he needed to stick to the broad principles and let this debate take place on Capitol Hill. I also argued that he really had to keep it simple. That he had to have a few clear, simple ways of describing what he was doing. And I also argued, finally, that if necessary, he would have to go to the budget process which allows you to get a bill through with a majority vote. And they have not foreclosed that possibility though it looks much more distant now. It looks as if that it will be possible, we hope, to pass a bill through the normal Senate process which requires 60 votes.
Now, I think he's been very shrewd to rely on Congress. I think the area where he's had the most trouble is the area of articulating a clear, simple compelling vision. And that's where I think it's interesting that he Public Health Insurance Plan has actually gotten ahead of President Obama and his White House team in some ways. I mean they talked about this during the campaign, they've said we'd like to have it, but they've also been concerned about whether it would be viable in the Senate. Olympia Snow. The maiden of our legislation—would she go for this? And what's happened as the debate has moved forward is that the Public Health Insurance Plan has taken on a life of its own politically. Americans in polls say they support it, a majority of American—a large majority of American physicians say they support it.
I'm often joking that any day now, the American Kennel Club will come out and say the majority of dogs say they support the Public Health Insurance Plan, you know, lending that all-important canine voice to the effort. But this is an area where there is a lot of support for it and Congressional Democrats have gotten very vested in it and the progressive community has gotten very vested in this idea. In part because it is clear and it is simple and it has a message. It says, "Yes, we're going to have to require that Americans have health insurance to move toward this new system we all want, but we should require that they have to get insurance from the same private insurance companies that helped get us into this mess. They should have the option, the choice, of enrolling in a public health insurance plan that competes with private insurers."
Question: Has the urgency of the healthcare debate surprised you?
Jacob Hacker: I'm not surprised because whenever we have an economic downturn it suddenly becomes apparent how manifestly our employment base system fails America. I mean, people are losing their jobs and at the same time they are losing their health insurance. Precisely when they most need security, they feel most insecure.
So we have seen a big increase in the share of Americans who lack health insurance and the only reason that that increase has been muted in the most recent downturn is because government has stepped in, in the form of Medicaid and the Children's Health Insurance Program to soften the blow. We know that about a third of Americans are saying right now that they are worried about losing their health insurance coverage.
So, when the economy goes sour, and it's gone very, very sour recently, that really accentuates people's concerns about their security and about healthcare. At the same time, if you think about it, this has been the leading cause of Democrats, since the Great Depression, since Franklin Roosevelt thought about including health insurance in the Social Security Act back in 1935; it's the great unfinished business of the New Deal, if you will. Truman was unable to do it. Johnson just decided he would just cover the aged. Clinton, most recently, tried and failed to enact a program that would expand health insurance coverage to all or most Americans.
So, for Democrats, this is the moment. If you think about it, they've got large majorities in Congress; they have a progressive President who is committed to this cause. And it really isn't just a political cause, if you think about it, it is central to our economy performing well. President Obama, during the campaign, kept talking about change, and hope, and a new foundation being laid for our economy and healthcare is really a crucial place to begin. It drains our government of money. The federal government is going to go deeper and deeper in the read if we don't control healthcare costs. It burdens our businesses, it is hurting working families, it means that millions of Americans feel insecure, it means that our healthcare is much more costly than it should be, and it means, quite frankly, that our healthcare system performs much less well than it should. Our basic health statistics and even the statistics that are used to measure the quality of care at the high level suggests that we are really paying a price for not having system that's inclusive and that's efficient. And we need to address that.
So, I think that's why I'm not surprised. I think that the reason that it's moved so quickly is precisely that it has to. If the President had not moved quickly to enact healthcare reform in this year, I think he would really have been waiting until his second term, if he had one. Because it's the case that as the election approaches, it's going to be much harder to take on such a big issue and after a mid-term election in which the historical record suggest that the Democrats are going to lose some seats. And the way the economy is right not, the might lose a fair number of seats. After an election like that, no one's going to have the sort of urge to really take on such a big issue.
So, this is the time and this is the moment, as President Obama has often said, and I think it's remarkable but necessary that they move so quickly.
Question: Will the public option give government undue power in the health insurance market?
Jacob Hacker: I think the insurance companies’ saying that they are worried about the public health insurance option is one of the better arguments for having one. The fact that they think that this public health insurance option is going to have to change the way they do business is one of the arguments for doing it, because if the private insurance companies were saying, "We're not so worried, it's just going to be another small competitive challenge," then I really would wonder if this was going to provide the kind of check and benchmark for private insurance companies that we need.
There’s valid criticisms of having a public health insurance plan competing with private plans, and they're all addressing the legislation that's been discussed on Capitol Hill. I mean, my proposal argued for a level playing field, which means that the private and the public health insurance plans have to abide by the same rules, that the public health insurance plan can't be funded by taxpayer dollars, it has to receive all its funds from the same sources that the private insurance plans receive, such as the subsidies for lower- and middle-income people who get coverage and the premiums that people pay. And finally, I've argued that there really should be strenuous efforts to make sure that there is adequate adjustment for plans that take on a higher risk population. In fact, to me, that's one of the concerns. That the public health insurance plan is probably going to be more attractive to people who really need care because they really want to have a transparent plan that is going to be there when they are sick, and if that's the case then we really need to work hard to make sure that the playing field isn't tilted against the public health insurance plan.
So, the other thing to say, and I think this is really crucial that people understand, is that what the private insurance companies are arguing against, really, is choice. I mean, they're arguing against the idea that there should be competition and people should be able to vote with their fee between private insurance plans and the new public insurance plan.
The polls suggest the people want to have that choice, but I think a lot of people are going to choose private health insurance plans that have name recognition, they've got decades of experience, they've got deep marketing pockets. Many people associate the government with poorer service. So, the public health insurance plan isn't going to start out with a dominant position. It will only gain a stronger position by convincing people that it can provide better coverage and higher quality of care. And ultimately, isn't that what this is about? Healthy competition, where the private insurance companies and the public plan are both building their strengths and remedying their weakness.
Private insurance plans have many virtues. There are some that don't have. They haven't been very good at holding down premiums; they haven't been very good at bargaining with providers, they haven't been as innovative as they say they have been in the delivery of care. I mean, right now, we're talking about Medicare taking the lead in reforming the delivery of our healthcare system. Well, I think that we should have a public health insurance plan for people younger than 65 that are contributing to that reform as well.
So, to me, the best argument for it is the private insurance companies are worried about it because that's precisely what we need. Real competition.
Question: Why do you oppose federally promoted health cooperatives?
Jacob Hacker: Well, I think the co-op model is just a fig leaf for people who are opposed to the public health insurance plan and don't want to have the blood of the public health insurance plan's demise on their hands. The Congressional Budget Office looked at this and said, the co-ops weren't going to make any of the market. I mean, I'm not against the idea of having member-run cooperative health plans. There are some wonderful plans out there, like Group Health Cooperative of Puget Sound, and Health Partners in Minnesota. But those plans are very small and limited and even with new federal funds, it's going to be very difficult to create those plans and have them compete effectively against these massive private insurance plans that dominate the market today. I mean, Group Health Cooperative in Puget Sound has a half million members, and Well Point has something like 33 million members. So, you need to have some very serious counter weight on day one to the private insurance plans and only a public health insurance plan that's linked to the Medicare program in important respects is going to have that.
So, one of the things that's really important about the House legislation is that it creates this new public health insurance plan, in part, building on the infrastructure of Medicare. It's run by the Department of Health and Human Services, it's a federal program, it will be offered nationwide. It will not have rates that are tied to Medicare's rates. That was a concession that was made to get the votes necessary to pass it, but it will have the Secretary of Health and Human Services negotiating rates with providers and probably using the bargaining power of this large pool effectively to try to keep down rates.
So, to me, the cooperatives are really just a way of hiding opposition to the public health insurance plan and there is only a few people who seriously think they're going to work. And one of them is Kent Conrad of North Dakota. So, that's why they're in the legislation, but I think for the most part, they don't have very strong support, either in Congress or outside it.
Question: How can average citizens influence the healthcare debate?
Jacob Hacker: Yeah, I think many Americans feel that this debate is kind of passing them by. And it's really something that worries me about the way in which we talk about healthcare in the United States. So much of the discussion takes place on a terrain and with language that is, health policy **** like. But most Americans can't comprehend. My favorite example of this is that you've got the White House Policy guru talking about how important it is to bend the cost curve. I mean, bend the cost curve? I don't think most Americans even knew there was a cost curve, and isn't a curve already bent?
I mean, most Americans care about affordability. Can they afford the coverage? Do they have security? Do they have stability? And I think that that is really what has to be talked about. And at the same time, I do think Americans need to be involved in this debate, and not just through ginned-up opposition that's expressed at town hall meetings, but through broader dialogue that is taking place.
To me, that's probably going to take place on two levels. On the one hand, if people want to get involved in this discussion, there is a lot still to be done. We are a long way from the end of this battle. We may be two months away, but two months in this kind of policy debate is a very long way. So, if you have an idea that you want to express to your member of Congress, or you want to take it to Washington, you should do it now. This is the moment. And I can tell you that when there is lots of attention to these issues on the part of individuals and the groups representing them, members of Congress do listen.
And the second thing I would say is that we're going to pass this bill, and it's not going to take place overnight. If this legislation gets passed, and I really hope it does, it's not going to get fully implemented until after 2013. And a lot of the responsibilities are going to have to be handled by the states, and carried out through new institutions that are going to be created. And anybody who would like to be involved is going to have ample opportunity to be involved at that stage as well.
I mean, if people are confused, they have to step back and just try to keep in mind that there really are these three broad, relatively simple goals in healthcare reform. Trying to share risks more broadly so that if you, or someone who gets a dread disease, that you're not going to be out there on your own. You're going to be sharing those costs with a large pool of Americans and you're in this with them.
And then second, you need to make sure there is shared responsibility. That employers, individuals, and the government are all stepping up and trying to address this challenge together and contributing to the costs of addressing that challenge.
And the third is individual responsibility. And that means not just taking care of yourself, but it means also taking the responsibility to get health insurance to use the new options that are available to people. If people understand that it really is three simple principles beneath all the complex policy tie, then they can start to think about what parts of those three elements of reform do they want to get engaged in trying to influence or taking advantage of if they're in need of health coverage.
Recorded on November 9, 2009
Interviewed by Austin Allen